Through much of 2001, consumer confidence looked more like consumer obliviousness. People kept on spending freely even as every economic indicator but consumer spending was going down. For better or worse, they finally seem to have caught on that incomes are down (as a Census report confirmed last week), while the stock market’s decline has made the “wealth effect” a mere memory. In a new Ipsos Public Affairs/Cook Political Report poll, 48 percent of respondents said they now feel less comfortable making major purchases (like a home or car) than they did six months ago. For that matter, 43 percent feel less comfortable making not-so-major household purchases. Job-security fears are plainly a big factor in this caution. Although unemployment rates have been fairly stable, 44 percent of respondents are less confident about job security for themselves and people they know than was the case six months ago. Still, fewer than one in 10 think their own finances will be weaker six months from now (see the chart), while four in 10 expect to be better off. Likewise, 31 percent believe the economy in their “local area” will be stronger, vs. 12 percent saying it will be weaker. If those numbers deteriorate, we’ll know it’s time to batten down the hatches.
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