Is the economy rebounding? Consumers in Chicago are skeptical, and it shows in the way they are spending.
With the economy showing some growth, are you ready to start spending? Chicagoans had mixed reactions to a report Thursday indicating that consumer confidence has declined in so far 2013.
“The economy, I feel like people are saying it’s on the rebound but I don’t know if I really believe it,” said Beth Campbell, a Chicago resident. She said she sees prices rising even at low-cost stores. “It makes me mad.”
The Bloomberg Consumer Comfort Index dropped last week -36.4 from -35.5 the week before. It was the third consecutive week the index has dropped. Last week’s decline was largely due to unexpected firings and higher U.S. payroll taxes, Bloomberg reported.
“I think the consumer is going to have a difficult time,” said Robert Brusca, chief economist at Facts & Opinions Economics in an interview.
The confidence numbers are surprisingly low, he added, given that jobless claims are decreasing. “It’s hard to know what the consumer is really thinking and it depends a lot on how the economy goes.”
A drop-off in December consumer confidence was partially due to the fiscal cliff standoff in Washington, though Brusca said that was too narrow of an explanation for consumer attitudes moving forward. “There’s no reason to expect that things would have gotten better because we got over the fiscal cliff,” he said. “It’s actually a fiscal obstacle course.”
Chicago resident Gerald Walker said people working in different industries feel differently about the economy. The people he knows in insurance and health care are faring well. People in the education industry seem to be more cautious due to efforts to reduce their pensions.
Brusca said people would be less likely to make discretionary purchases with the continuing fiscal debates in Washington. The rebound in the housing sector is one clear positive but it is not spread evenly around the country, he noted.
The Bloomberg Consumer Comfort Index, released since 1985, is calculated using a random sample of people, measuring their perceptions on three things: the state of the economy, personal finances and whether it is a good time to spend.
Brusca said that the index helps predict the attitudes consumers will have in the future. “When [the index] starts turning in one direction, it gives you a good indicator on what the consumer is going to do next.”