Economic Expectations Worsen

June 27, 2011

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Analytics, Automated & MarTech | Data-driven | Financial Services | Uncategorized

pew-research-views-of-economy-current-future-jun11.gifPositive expectations regarding future economic conditions, which remained high even during the depths of the recession, have declined and now stand at their lowest point since mid-2008, according to June 2011 data from the Pew Research Center. Twenty-nine percent of US adults expect that economic conditions will be better a year from now while 23% say things will be worse, the respective lowest and highest percentages giving these answers since July 2008 (30% and 21%).

Outlook Dims from October

Americans’ economic outlook has dimmed considerably from October 2010, the last time Pew conducted this survey. In October, 35% said economic conditions will be better in a year and 16% said they will be worse. These figures represent a respective 17% decline in the percentage expecting improvement and 31% increase in the percentage expecting decline.

View of Current Situation Improves

pew-economic-outlook-june-2010.JPGInterestingly, the view of the current US economic situation is actually somewhat better now than in October. While 8% of adults rated the current economy excellent/good in both October and June, 45% rated it fair in June, 18% more than the 38% who rated it fair in October. In addition, 46% rated the current economy poor in June, 15% less than the 54% who did so in October.

View of Personal Finances Also Improves

Despite a souring mood about the general economy, Americans are more upbeat about their personal finances. Views on personal financial situation have generally remained flat since October, with the notable exception of whether they will improve in the next year (up about 10% from 51% to 56%).

Severe Financial Challenges More Common than in ’09

pew-challenges-june-2011.JPGAlthough most economists pinpoint early- to mid-2009 as the low point of the current/most recent recession, the survey finds that the number of Americans facing severe financial problems has remained steady over the past year, but is generally higher in than in early 2009.

In the new survey, 29% say that in the past year they have had trouble getting or paying for medical care, up 26% from 23% in February 2009, and 26% say they have had problems paying their rent or mortgage, up 30% from 20% in February 2009. Another 16% say they have been laid off or lost their job, which is actually an 11% improvement from 18% in February 2009.

Overall, 44% say they have encountered one or more of these financial problems over the past year, which is unchanged from last year but 19% higher than in February 2009 (37%). These problems are increasingly affecting the poor; fully 70% of those with family incomes below $30,000 have experienced one or more financial difficulty, up 19% from 59% last year.

Moreover, substantial numbers of working people continue to express job-related anxiety: 27% say it is very or somewhat likely they may have their health care benefits reduced or eliminated, while 26% say it as at least somewhat likely they may be asked to take a pay cut. More than half of those who work full- or part-time (55%) say it is likely they may face one or more job-related problems in the next year (a pay cut, benefits cut or losing their job) up 12% from 49% last year.

Consumer Reports: Troubles Stay Flat

The Consumer Reports Trouble Tracker Index was virtually unchanged at 48.6 in June 2011, from May’s 48.3. The Trouble Tracker Index is still down substantially from February’s recent high of 58.7. The financial difficulties that were on the rise in the past 30 days were led by negative changes to credit-card terms (increased rates, penalty fees), at 7.2%, which was up 14% from 6.3% in May. Moreover, there was a significant 59% increase in the number of those who reported a missed mortgage payment (2.7%), up from 1.7%.

Overall, the most prevalent consumer trouble remains the inability to afford medical bills or medications, unchanged since last month at 14%. Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days, with 22.4% unable to afford medical bills or medications; 12.2% missed payment on a major bill (not a mortgage); and, 9.1% lost or reduced healthcare coverage.

The Consumer Reports Trouble Tracker Index focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered. The negative events include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest-rate increase, penalty fees, reduced lines of credit or other changes in credit-card terms, job loss or layoffs, reduced health-care coverage or the denial of personal loans. The Consumer Reports Trouble Tracker Index is then calculated as the proportion of consumers that have experienced at least one of the negative events comprising the index multiplied by the average number of events encountered.

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