MTSU Study Says "Consumers Suddenly Less Optimistic"!

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Middle Tennessee State University's Office of Consumer Research released their year-long study that shows consumers are concerned about the economy.

Suddenly Less Optimistic

The MTSU study notes that local consumers have suddenly changed their minds and have become much less optimistic about the future of the American economy.  The overall consumer outlook index dropped sharply to 106 from 178 in September.  Any momentum that was building to help bolster consumers’ outlook on the economy has seemingly halted.  This change in outlook is fueled by growing concerns about the future economy. The future expectations index plunged to 55 from 112.   Similarly, consumers have taken a less positive view toward making large purchases.  The purchasing situation index dropped to 73 from 92.  Perceptions of the current economy are still negative, even though the current situation index gained modestly to -22 from -26.  In general, consumers continue to view the current economy negatively and have become increasing wary of the prospects for a quick turnaround in the economy. 


The Middle Tennessee Consumer Outlook Index and Components 



Sept ‘10

Dec ‘10

Feb ‘11

Apr ‘11

May ‘11

Sept ‘11





Apr ‘12

Sept ‘12

Nov ‘12

Overall Outlook Index












Current Situation Index












Future Expectations Index












Purchasing Index












The current poll of 422 randomly selected adult residents of Davidson, Rutherford and Williamson counties was conducted the evenings of Tuesday, November 27 and Thursday, November 29. 

What Was on Consumers’ Minds?     Consumers were given an opportunity to offer a reason for why they rated the economy as they did.  Below is a word cloud that depicts the 25 most frequently mentioned words that appeared in these open-ended responses.  The larger the word, the more frequently it was mentioned.  This can provide clues about the thoughts that were on consumers’ minds as they responded to the survey. 

Current Situation      The fact that the current situation index remains in the negative range indicates that the number of consumers who hold negative views of the current economy outnumber those who hold positive views of the current economy.   Further, given that the current situation index has been in the negative range since April of 2008, this indicates a long-held frustration with the state of the economy.  

Although the percent of consumers who said that business conditions in the country as a whole are good rose modestly to 14 from 11, the percent who said that business conditions in Middle Tennessee are good dropped to 35 from 40. 

Future Expectations     Any optimism regarding the future of the economy that was building since this time last year has apparently ceased, indicating that local consumers are becoming increasingly concerned about the future of the economy.  Worries about the current and future job market, concerns about the growing national debt and the potential fiscal cliff, fears of increasing taxes, and growing concerns about the long term prospects for the stock market are all contributing to the pessimistic turn in consumers’ outlook.

Although the percent of consumers who said that six months from now the economy will be better held steady, the percent of consumers who expect the future economy to be worse rose (to 28 percent from 13 percent for the overall American economy; and to 18 percent from 7 percent for the local economy).  Similarly, while perceptions of the current job market were relatively unchanged, the percent who said that there will be fewer job openings in the next six months rose to 16 percent from 9 percent.   

Purchasing Situation     The purchasing situation index had been steadily increasing since May of 2011.  However, this positive trend has also reversed.  This could translate into consumers becoming less willing to spend money.

The consumer outlook index scores are based on consumers’ responses to eleven questions measuring their perceptions of the current economy, the future economy, jobs, personal finances, and whether or not now is a good time to make large purchases.  Four questions make up the current situation index, four questions make up the future expectations index, and three questions make up the purchasing index.  The overall outlook index is based on all eleven questions combined (the complete questions are shown at the end of this report).

The scores for each index are computed by adding the percentage of favorable responses to each question and subtracting the percentage of negative responses to each question.  A net score of zero would indicate that the percentage of consumers who hold negative views of the economy is equal to the percentage of consumers who hold positive views of the economy.  A net positive score would indicate that consumers who hold positive views of the economy outnumber those who hold negative views of the economy.   

Consumer Investments: The Stock Market
A rising U.S. stock market can give consumers a greater feeling of wealth as their investments and savings grow.  We see a marked increase in the percent of consumers who expect the stock market to decrease in value over the next year, coupled with a modest decrease in the percent who expect the stock market to rise in value over the next year. 

Consumer Saving
Consumers were also asked about their current level of saving compared to their level of saving before the most recent recession began. 

Consumers were also asked to look ahead and predict their level of saving after the most recent recession has completely ended and the economy strengthens.   These results have remained fairly steady during the past few surveys.  Almost half of consumers surveyed expect to increase their level of saving, whereas very few consumers expect to decrease their level of saving. 

Christmas and Holiday Spending
The holiday shopping season is an important time for most retailers.  A concern for local retailers is that the sudden pessimistic shifts in consumers’ outlook can dampen their willingness to spend money on holiday and Christmas gifts. 

When asked about their expected Christmas and holiday spending, fewer consumers expect to increase their spending (compared to what they spent last year), whereas more consumers expect to spend about the same as last year. 

Comparison to National Surveys     The 13th annual holiday spending survey, conducted by the Consumer Federation of America (CFA) and the Credit Union National Association (CUNA) recently found that 12 percent of Americans expect to increase their holiday spending from last year, and 38 percent expect to decrease their holiday spending from last year.[2]   This suggests an overall increase in holiday spending for this year, compared to last year.  If this holds true for the nation as a whole, it is welcome news for American businesses and retailers. 

Some of the best-selling gift categories for this year are expected to be electronics (especially tablets), jewelry, gift cards, clothing, personal care products, home and garden, sporting goods, hobbies, and of course toys.      

Consumers were also asked to estimate the amount of money they expect to spend on Christmas and holiday gifts this year.  Fewer than half (42 percent) of all local consumers expect to spend less than $500.  Alternatively, 58 percent expect to spend more than $500.  Further, almost one in four local consumers expects to spend more than $1,000 on Christmas and holiday gifts.          

Results from a recent survey conducted by the National Retail Federation suggests that American families will spend an average of $749.51 on gifts, décor, greeting cards and more this holiday season, up slightly from the $740.57 they spent last year.[3]

Annual Consumer Spending
The uneasiness about the current economy, fears about the future of the economy, and the prospect of higher taxes might have a dampening effect on consumers’ spending.  When asked to estimate their total amount of consumer spending for 2012, a greater percent of consumers expect to spend less than they spent last year, and fewer consumers expect to spend more than they spent last year.     

Perceptions of the Economy
Compared to consumers across the country as a whole, local consumers have traditionally held more positive perceptions of the economy.  Local consumers are comparatively more optimistic about the future of the American economy, are more optimistic about the future of the job market, and are more optimistic about their personal financial situation in the next year. 

Comparing Middle Tennessee Consumers to

Consumers Across the Country as a Whole







Business conditions in the U.S. are good.



Six months from now, business conditions in the U.S. will be better.



Jobs are easy to find (plentiful).



Six months from now, there will be more job openings.



In 12 months my personal financial situation (income) will be better.



The Psychology of Consumers
The psychology of consumers can have dramatic effects on the future of the economy.  Consumer spending makes up two-thirds of the American economy.  Decreases in consumer confidence that translate into reduced purchasing patterns can have significant negative effects on the economy.  Conversely, increases in consumer confidence that translate into accelerated consumer spending can have significant positive effects on the economy.  When consumers begin to feel comfortable about the future of the economy and their own personal financial situation, they will increase their spending.  Such spending would then help to grow the economy as manufacturers begin to produce more and retailers begin to fill jobs to meet increased consumer demand.  This type of self-fulfilling prophecy is illustrated below in the Consumer Confidence Cycle.   

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