A new Gallup survey shows that consumers are losing confidence in the economy at an accelerating rate.
Gallup’s U.S. Economic Confidence Index was -9 for the week ending May 3 — its lowest weekly score since December. This reflects a six-point decline from the previous week, and is the largest week-to-week drop since last July.
The survey looks at how people feel about the present economy and the future prospects for improvement. Not only were Americans down on how things are now, they are growing increasingly concerned about the future.
Note how the economic outlook line crosses above the current conditions line late in 2014. At that point, consumers felt like things would be better than at the current time. Looking at late February ’15, we see the reversal. Current condition numbers remains hopeful, but the outlook went negative quite suddenly.
May brings about a horrific picture. Not only did current condition sentiment drop significantly, the future outlook number dropped even more indicating that Americans see the economy as worse than before and getting much worse in the future.
This index measures sentiment. As such, it does not show what people are spending or have spent. It is important though, as how consumers view the future of the economy will influence their decisions on spending.
Another factor that might be affecting sentiment is that Credit card default rates have seen a disturbing trend upwards leaving many maxed-out Americans unable to use debt to finance purchases.
If Americans think they might lose their jobs, have their hours reduced or are having trouble paying their current bills, they won’t run out and buy that new car, T.V. or refrigerator. They’ll just make do with what they have.
This negative outlook on the economy may be an indicator of why the recent decrease in gas prices has done nothing to boost consumer spending.