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Stabilizing Job Fears Could Lead to Future Spending

Consumers’ attitudes toward the economy and intentions to shop are at the lowest point since October, but their concerns about job security appear to be leveling off and could indicate they are preparing to spend again, according to research from The NPD Group, Inc.

These findings were reported in NPD’s Economy Tracker, a monthly report on consumer attitudes and spending intentions, which measures consumer concerns regarding the economy on a scale between 0 and 100, with 0 being “very concerned” and 100 being “very confident.”  In February 2009, the Economy Tracker’s General Economic Perception Indicator fell to 36.7, from 38 in October.

A decline in consumer shopping intentions also mirrored consumer concerns about the economy, NPD reported. The Economy Tracker’s Retail Response Indicator measures consumer spending intentions on a 0-to-100 scale, with 0 representing ‘reduce or spend less” and 100 representing “spend More.” The Retail Response Indicator dropped more than five points to 35.4 in February, compared with 40.7 in October.

“One important thing to note here is that the two-point drop in how consumers feel about the economy in general translates to a five-point drop in what consumers’ purchase intentions are,” noted Marshal Cohen, chief industry analyst, The NPD Group. “And while a five-point drop doesn’t seem like much, it represents millions of dollars.”

Despite consumers’ fading confidence regarding the economy in general, NPD did find evidence of a potentially positive sign in the leveling off of concern about job security.

“Of all the data I look at, this measure provides one of the best indications of how consumers are going to behave,” Cohen said. “February’s results show consumers feeling better on this front and could signal consumer stabilization, a point at which consumers catch their breath, reassess and prioritize their purchase needs in preparation to begin spending again. Stabilization is a precursor to growth.”

“While, I think it’s premature to talk recovery, I think if we are able to spot signs of stabilization, we’ll be better positioned for recovery and then the return to growth,” added Cohen.

About the research: The Economy Tracker is based on online surveys completed by 1,000 respondents each month. The sample is nationally representative. Results are delivered in 12 monthly reports, quarterly summaries and a year-end analysis.