The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
Middle Tennessee Consumer Confidence on the Rise
Last week, the Federal Reserve Bank of Atlanta's research director Dave Altig wrote a macroblog post that emphasized the importance of consumer spending as the economy tries to rebound from a disappointing first quarter. Incoming data indicate that consumers haven't been willing to open up their wallets as much as expected considering recent economic conditions. The underlying fundamentals that influence consumer spending would suggest a higher level of consumption than the economy is currently experiencing. In a recent speech, Atlanta Fed President Dennis Lockhart pointed out these fundamentals, which included real personal income growth, household wealth, access to credit, and consumer confidence. According to the Middle Tennessee Consumer Outlook Index, released on May 1, Middle Tennessee has the confidence fundamental covered.
The Middle Tennessee Consumer Confidence survey is conducted by the Office of Consumer Research at Middle Tennessee State University, headed by Professor Timothy Graeff. Students in Graeff's marketing research course conduct the survey by phone. The 11-question survey asks questions related to economic conditions in the United States as well as Middle Tennessee.
The overall index rose to its highest level since June of 2004 (see the chart).
Participants felt particularly more optimistic about the local economy than the national economy. A solid 65 percent of survey participants indicated that business conditions in Middle Tennessee were good, but only 27 percent felt that conditions were good for the nation.
Looking forward, the future expectations index also rose since the last survey, suggesting that people are more optimistic about the economy over the near term. When asked what conditions for Middle Tennessee would be like in six months, 44 percent indicated things would be better, and 50 percent felt things would be about the same. The national numbers were less optimistic than the local but still represented an improvement over the last survey, with 26 percent indicating conditions would improve and 57 percent stating conditions would stay about the same.
The national consumer confidence indexes have trended up overall since the depths of the recession but still have not reached levels seen in the mid-2000s (see the chart).
Still, as Dave Altig pointed out in his macroblog post and President Lockhart in his speech, the fundamentals suggest that consumer spending will pick up in the not-too-distant future. Our confidence may be slightly guarded, but we are optimistic. Just like Middle Tennessee.
By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch
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Holiday spending is typically make-or-break time for merchants—that's nothing new. But what was a bit surprising is the optimism we've seen in industry forecasts, which seems to run counter to the general apprehension most contacts in the retail sector have shared with regard to their overall outlook.
The traditional winter holidays are expected to bring healthy sales results. The National Retail Federation (NRF) forecasts that holiday sales this year will increase 4.1 percent to $586.1 billion, a bit below 2011's actual holiday sales increase of 5.6 percent but above the 10-year average holiday sales increase of 3.5 percent. The NRF tallies total retail industry sales from November and December—61 days total—to determine holiday sales. Holidays during this period include Thanksgiving, Christmas, Hanukkah, and Kwanzaa.
NRF Chief Economist Jack Kleinhenz said that
[w]hile moderate compared to what we experienced the last two holiday seasons, the forecast is a very pragmatic look at what to expect this year given the current rate of economic growth. There's still some general anxiety amongst consumers when it comes to how the state of the economy is impacting their spending plans, but retailers can expect to see excitement around their promotions and plenty of bargain hunters both online and in stores in the coming months.
The Internet will continue to play a significant role in holiday sales as well, according to the NRF. Its survey showed that more than half (51.8 percent) will shop online for gifts and other items this holiday season, up from 46.7 percent last year. Shop.org, NRF's digital division, expects online holiday sales will grow 12 percent over last season.
The spending boost is expected to begin before the traditional holiday season, according to the NRF. A record 170 million people plan to celebrate Halloween this year, according to the 2012 Halloween consumer spending survey conducted by BIGinsight. On average, consumers are expected to spend nearly $80 on decorations, costumes, and candy, up from just over $72 last year.
As the long holiday season progresses, we'll be checking in between now and the end of the year to determine if our retail contacts in the region are indeed experiencing a positive holiday season. It will serve as a useful barometer to the state of the consumer heading into 2013.
By Mike Chriszt, a vice president in the Atlanta Fed's research department and
Chris Viets, a REIN analyst in the Atlanta Fed's Jacksonville Branch
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Will consumers save or spend?
After a steady decline in the savings rate since the 1980s, consumers started to ramp up their savings during the latest recession. The personal savings rate increased to more than 8 percent of disposable income during the latest recession, following a savings rate as low as 1 percent during the 2002–07 expansion. The savings rate remains high, at 5.3 percent in September (see chart 1), and many economists wonder if consumers will continue to save more of their income and spend less, or return to lower savings and more spending. The amount of consumer spending can have a large impact on economic growth, as this spending accounts for about 70 percent of gross domestic product.
To get some insight into consumers' current and future savings, our friend, Timothy Graeff at Middle Tennessee State University (MTSU) asked the question in the school's consumer survey.
Five times a year, Dr. Graeff and his team at the Office of Consumer Research conduct telephone interviews of more than 300 residents in middle Tennessee. Their survey consists of 11 questions measuring their perceptions of the current economy, the future economy, and jobs in both the United States and the middle Tennessee. Questions are also asked about their current state and future expectations of personal finances and plans for large purchases such as a house, car, and large household items. An overall confidence index is based on all 11 questions. In addition, they ask special questions, which in the past have included consumer's expectations of future spending, taxes, and stock market performance.
The September survey, asking about consumer savings, showed that those consumers who answered that they are currently saving more of their income than they did before the recession expect to continue or increase their savings rate as the economy strengthens (see chart 2). Of those who answered that they are currently saving less than before the recession, the vast majority are planning on saving more when the economy strengthens. Meanwhile, the consumers who reported that they maintained their savings rate through the recession answered that they plan to continue the same level of savings. All in all, very few of the consumers polled expect to decrease their savings rate as the economy strengthens.
MTSU also houses the Business and Economic Research Center under the direction of Dr. David Penn. Here you can find information relating to Tennessee's economy, including the housing market, labor market, global commerce, and more.
By Sandra Kollen, a senior analyst in the Atlanta Fed's research department
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