UCI

The Economy: Consumer Confidence

Orange County's "bankruptcy blues" appear to have taken a toll on consumer confidence. After staging big gains in 1994, the recovery in financial optimism has stalled this year. This trend is at least partly tied to the personal impacts and financial fears generated by the county's investment fund losses.

All five consumer confidence questions show no improvement from 1994. Today, 38 percent describe themselves as better off financially this year, and 45 percent expect to be better off next year. Sixty-three percent see this as a good time to make major purchases. Forty-eight percent expect good times for the U.S. economy in the next year, while 45 percent expect good times over the next five years.

The five-question Consumer Confidence Index in Orange County is now at 90, which is statistically unchanged from the 89 rating of a year ago. The local index remains below the 100-plus readings of Orange County's booming period of 1985 to 1989. However, it is above the dismal confidence ratings which began in 1990 (i.e. 85) and hit bottom in 1993 (i.e. 73).

Nationwide, the Consumer Confidence Index now stands at 94, according to the University of Michigan, meaning that the local index continues to lag behind the U.S. ratings in the 1990s.

The Consumer Confidence Index is calculated from a formula provided by the University of Michigan, which computes scores for each question (better - worse + 100), then adjusts by the 1966 base period. The national index score was 100 in 1966.

One of the reasons the local consumer confidence ratings are below the national average is the low scores among the one in four residents who say they are directly affected by or very fearful of the impacts of the bankruptcy. The indices for the impacted (79) and highly fearful (78) groups are below 80, which recalls the recession-era readings found in the early 1990s. The local scores are at or above the U.S. average for those who do not see themselves being affected by the county's financial crisis (94) or are not fearful about its future impacts (99).

Those who have been impacted by the bankruptcy are less likely than others to say they are better off now than they were a year ago (32% to 40%), that the outlook for the U.S. economy next year is good (40% to 50%) and that now is a good time to buy major household items (55% to 65%).

Those who are very fearful about the bankruptcy's future impacts on themselves are also less likely than those who have no fears to say they will be better off next year than they are today (41% to 48%), that the outlook for the U.S. economy for the next five years is good (35% to 54%) and that now is a good time to buy major household items (54% to 70%).