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Wednesday, November 2, 2011

Some Bad News Here!

In The Great Recession Conspiracy, you will recall that the Business Cycle is driven by consumer confidence.  These recent data from McKinsey are not at all cheerful.

America’s slumping consumer confidence

US consumers were feeling better about the economic outlook six months ago. Now they are not so sure—and they are changing the way they shop.

Last spring, Americans thought they had turned the economic corner. Now they are not so sure. Indeed, consumers are feeling noticeably less confident about the economy than they were in April, and they don’t believe things are going to get better any time soon. Job insecurity is rising, and optimism about the economy—defined as the ability to make ends meet—has slumped to 23 percent, down from 35 percent in March 2011 and 41 percent in September 2009 (exhibit). That’s even lower than it was at the deepest point of the recession.

Consumer behavior is changing as well. Many shoppers, for example, are “trading down” to cheaper brands and shopping in dollar stores—and not minding the change much either. More than half said the cheaper brands were better than they had expected and delivered superior value for the money; ditto for the experience of shopping in dollar stores. It’s not surprising, then, that 82 percent of consumers said they were likely to stick to their frugal habits, even if the economy begins to boom again.
That’s the gloomy bottom line in McKinsey’s seventh survey of US consumers, conducted every six months since August 2008.1 If there is a silver lining around these clouds of doubt, it is that consumers appear to be acting a little more confidently than they are saying. Specifically, fewer of them are cutting back on dining out, and the slowdown in spending is itself abating.
Still, it is the growing sense of personal insecurity that stands out. America’s consumers are hanging in, hanging on, and hoping for the best—but without much verve.


About the Authors
Anne Martinez is a consultant in McKinsey’s New Jersey office, where Claudia Benshimol Severin is a senior expert.

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