Consumer Sentiment Deteriorates Further

Jean Crumrine co-wrote this article

ChangeWave's latest consumer spending survey shows a worsening in U.S. consumer sentiment and expectations.

Seven-in-ten (70%) consumers now believe the overall direction of the U.S. economy is going to worsen over the next 90 days - 6-pts more than a month ago. Only 7% believe the economy will improve - a decline of 1-pt to the lowest level ever in a ChangeWave survey.

The ChangeWave survey of 2,710 U.S. consumers was conducted March 3-10, 2009, and there were other sentiment indicators that echoed these findings, including:

• 66% of respondents reported they are dissatisfied with their personal finances - 7-pts worse than in February. Just 3% said they are Very Satisfied.

• 67% said they're Less Confident in the U.S. stock market than they were 90 days ago - a whopping 25-pts worse than previously. Only 7% said More Confident - 7-pts worse than previously. Once again, that's the worst ever for a ChangeWave survey.

In terms of actual spending, the best that can be said about the March survey is that the rate of consumer spending going forward is similar to the rate seen in February. In other words, the month over month spending rate is essentially flat.

On the upside, 13% of U.S. respondents now say they'll spend more money over the next 90 days - which is 1-pt better than in February. However, 62% say they'll spend less money, 1-pt worse than previously.

Impact of U.S. Stimulus Tax Credit Appears Far Different than Intended

We also asked respondents who expect to receive a tax credit as part of the recently enacted U.S. economic stimulus package, to tell us how they'll most likely use the money.

The results may be disheartening to those who believe the stimulus tax credit ($400 per individual/ $800 per family) will help jumpstart U.S. consumer spending.

While a strong majority of respondents say they're most likely to use the special tax credit to either pay down debt (34%), save the money (29%), or spend it on everyday items (29%), only a tiny percentage say they'll spend it on consumer electronics (2%) or big ticket items (1%).

As the above comparative chart shows, these results are even more bearish than our findings back in May 2008 on the likely usage of the Bush tax rebate checks.

Thus, these survey findings dispute the notion that consumers will race out to spend their tax credit and thereby stimulate the economy. Rather, the findings present a picture of an American consumer hunkered down and trying to wait out the recession.

Retail Spending Trends

Costco (COST; +3) and Wal-Mart (WMT; +2) are the only U.S. retailers in our survey that registered even a slight increase in overall spending going forward.

Nonetheless, for the third month in a row, spending on Household Repairs/ Improvements has shown signs of inching up. And while Restaurant spending continues to be the weakest of all categories, here too we're seeing a slight improvement over a month ago.

Consumer Electronics spending, however, has once again recorded a record new low for a ChangeWave survey. Only 10% of respondents say they'll spend more on electronics over the next 90 days compared to 46% who will spend less - a net 5-pts worse than previously.

And there's more bad news for industry leader Best Buy (BBY). Even though its perennial rival has closed the doors for good, Best Buy shows no signs of capitalizing in terms of increasing its market share in home entertainment shopping going forward.

On the contrary, even with Circuit City gone only 33% say they'll shop at Best Buy over the next 90 days - 5-pts less than in February and the lowest level since we first began asking this question nearly three years ago.

On a brighter note, Amazon.com (AMZN) (26%; up 1-pt) continues to hold its own in the home entertainment and networking market, up 1-pt since the previous survey.

Comments

[Karen Consumer]

As a result of a car accident that totalled my car on 2/25/09, I HAD to buy a new vehicle. not "new" new, a used 2007 replacement of my 2000 year car. I got financing, its %17.99 interest on a 13k loan with $3,500 down payment (cash from the previous car being totaled insurance payment plus savings) but I feel damn lucky to get the loan. Now I have a $333 per month payment I didn't have before, but at least my tax cut ($10 per month) will cover the increase of my full coverage insurance ($7 per month).

But I'm not pessimistic about the short term future, no, not at all.

2009 Mar 20 02:53 PM

[Mad Hedge Fund Trader]

Thanks for the stats. Consumer prices jumped by 0.4% in February, the largest increase since July, suggesting that we may not be plunging into a deflationary death spiral after all. Rising gasoline and clothing prices led the way. Expect contradictory economic data to increase from here.

2009 Mar 20 03:49 PM

[henarl]

The next bubble, building fast, is fear and neither the Fed nor the government has very much control over that. The old party-on mentality is rapidly disappearing. Individual spending is out and saving is in.

2009 Mar 21 01:23 PM

[madmilker]

With America being $53 trillion in debt it's bout time tat the "we the people" started saving. I jus don't like this coming up in my rear view mirror......
mwhodges.home.att.net/...

2009 Mar 31 01:54 PM