Utahns’ confidence in the economy plunged in May, continuing a volatile up-and-down pattern over the past five months that suggests consumers haven’t fully bought into the economic recovery.
The Zions Bank Consumer Attitude Index fell 6.3 percentage points, to 79, down from 85.3 in April, the Cicero Group/Dan Jones and Associates said Tuesday.
Nationally, the Conference Board said that its Consumer Confidence Index stands at 64.9, down from a revised 68.7 in April, the lowest reading in months.
Consumer confidence is widely watched because their spending accounts for 70 percent of economic activity. May’s figures for Utah and the U.S. are significantly below the 90 reading that indicates a healthy economy. By contrast, a reading of less than 70 suggests the economy is shrinking. Anything in between is considered neutral.
“Frankly, we’ve been in that neutral zone more often than not lately,” said Randy Shumway, CEO for the Cicero Group, which prepared the index.
In fact, the Utah index has never reached 90 since Zions launched it in January 2011. In December, the gauge of consumer sentiment suddenly surged above 80, only to fall back in January. The same one step up, one step back has occurred every month since. In April, the index hit a 16-month high — only to stumble in May.
“There is real volatility,” Shumway said. “We are doing much better in Utah than the rest of the nation. But consumer confidence isn’t where it needs to be for a full economic recovery.”
The May figures show that consumers need more encouraging news before their concerns start to dissipate. Despite easing gas prices, Utahns continued to worry about dysfunction in Congress, a worsening European economy that they fear will negatively impact the U.S., decelerating growth in China and political campaigns that demand “negative characterizations [of the U.S. economy] in order to encourage change,” Shumway said.
Apprehensions about the economy appear to be focused on current conditions rather than those six months from now. The part of the index that looks out a half-year stood at 91.7 in Utah — down 6.7 points, but still strong. The present situation index decreased 5.7 points, to 60.1.
Word apparently is getting around that fears of $5 a gallon gasoline were unfounded. The number of Utahns who believe prices will increase over the next 12 months fell 8 points from April. Utahns also are increasingly confident that interest rates and consumer prices will remain in check.
Shumway expects confidence levels to show overall improvement during the remaining months of 2012. “But it’s going to continue to be a slow rebound, and you’ll see ebbs and flows each month,” he said.
The progress is real, said Paul Swenson, president of Colonial Flag, a flag manufacturer and lawn decoration retailer in Sandy. Sales are back to normal, after a sharp downturn in 2008 that lasted until last year.
“I think people at the residential level are willing to spend a little more on things that brings them joy,” Swenson said.