April 26, 2011
Americans' Economic Confidence Declines Further
Americans' Economic Confidence Declines Further
Americans' declining confidence contrasts with the improving trend at this time a year ago
PRINCETON, NJ -- Gallup's Economic Confidence Index dropped to -39 in the week ending April 24 -- a new weekly low for 2011. This continues a downward trend that began in mid-February. The current deterioration of confidence contrasts sharply with the improving trend found at this time a year ago.
Gallup's Economic Confidence Index consists of two measures: one evaluating Americans' expectations about the future direction of the economy -- whether it is "getting better" or "getting worse" -- and the other rating Americans' perceptions of current economic conditions.
"Poor" Ratings of Economy Reach 2011 High
Nearly half of Americans rated current economic conditions "poor" during the week ending April 24 -- the highest level of negativity on this measure so far this year. This is also somewhat worse than the 42% "poor" rating found in the same week a year ago.
Optimism About Economic Outlook Drops to 2011 Low
Slightly more than one in four Americans said the economy is "getting better" last week. This measure has been declining since mid-February, and is now at its 2011 low. Far fewer Americans currently feel the economy is improving than held that expectation a year ago, when 41% said things were getting better.
Implications
Americans may have good reason to be less confident now than they were earlier this year. Gas prices are surging and are approaching the 2008 record high of $4.11 a gallon. It seems as though Americans' forecast of a peak price of $4.36 for 2011 is well within striking distance. While upper-income Americans can tolerate these prices better than their lower- and middle-income counterparts, talk of $4 and $5 pump prices is likely to depress all Americans' future expectations for the U.S. economy.
Food prices are also surging, and jobs remain a major economic problem. Gallup Daily tracking shows that while there has been a modest improvement in the jobs situation, essentially the same percentage of Americans are unemployed today (9.6%) as was the case in mid-January. Although some economic observers may downplay the impact of plummeting confidence and surging prices on the U.S. economy, many economists are lowering their economic forecasts for the first quarter of 2011 -- from the 3% to 4% range they originally estimated to the 1 ½% to 2% range.
The beginning of the 2012 presidential campaign may also be creating added uncertainty and depressing economic confidence. Generally, the political confrontations taking shape over federal budget cuts, increased taxes, and raising the federal debt limit may be a source of concern for Americans.
Just 12 months ago, economic confidence was improving and there was talk of "frugality fatigue." The U.S. sawa sharp spike in spending -- particularly among those with higher incomes -- during May 2010. Things were looking up for the nation's retailers and the economy as a whole until the debt crisis in Europe surfaced.
This year, economic confidence is going in the opposite direction. There is an increasing danger of stagflation as prices surge and the economy slows. As a result, retailers and the economy could find it difficult to match last May's sales performance in 2011.
Gallup.com reports results from these indexes in daily, weekly, and monthly averages and in Gallup.com stories. Complete trend data are always available to view and export in the following charts:
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