Consumer Confidence Vs. Consumer Hysteria

Is this year’s holiday shopping season doomed by Katrina and soaring gasoline prices? You needn’t listen hard to hear lots of whispers to that effect. The National Retail Federation is somewhat more upbeat, anticipating a 5 percent gain this year vs. last—less than 2004’s 6.7 percent gain, but still respectable. One cause for optimism is that consumers have built high (and, perhaps, unsustainable) levels of gloom into their attitudes, leaving room for them to be pleasantly surprised if the world doesn’t go to hell in a handbasket. The latest Conference Board Consumer Confidence Index showed the steepest one-month plunge since 1990. Gas prices are the obvious culprit. In a mid-September Ipsos Public Affairs poll, 58 percent of respondents said they think the post-Katrina price rise will be “long-term,” vs. 41 percent expecting it to be “short-lived.” In fact, though, pump prices generally drifted downwards in September. If a gallon of gas costs a mere $2.50 by Thanksgiving, people may decide the sky isn’t falling after all—and, hence, may shop accordingly for the holidays.