Utah consumers in good mood going into holiday buying season
What a difference a month makes.
October's partial government shutdown put Utah consumers in a pessimistic mood. Zions Bank Consumer Attitude Index decreased 14.6 points, the sharpest drop since the survey began in January of 2011.
That all changed this month.
According to Randy Shumway, chief executive officer for The Cicero Group that compiles the numbers, the index increased 15.7 percent to 93.8 from October to November, the most significant upswing in consumer confidence in the survey's history.
Utah's optimism differs significantly from the national Consumer Confidence Index, which decreased two points to 70.4 this month.
Why does this matter?
Simply stated, optimistic consumers are more willing to spend their money, something that is important to the economy during the critical holiday gift-buying season.
"Although Washington still has a lot of work to do to regain consumer trust, a reopened federal government was clearly welcome news," said Scott Anderson, president and CEO of Zions Bank in a statement accompanying the numbers. "While we were surprised by the rate at which consumers regained their confidence, we noted last month there was still plenty for consumers to be optimistic about in spite of the shutdown. A rebound in consumer confidence was critical, since a weaker-than-expected holiday spending season could disrupt our ongoing economic recovery."
Shumway, speaking Tuesday at Zion Banks' new Business Resource Center at 120 S. Main Street, said that a Consumer Attitude Index number below 70 suggests economic trouble, between 70 and 90 is in a gray zone, 90 to 110 is positive territory and more than 110 excellent.
The Cicero Group is a market research firm that compiles this data monthly to coincide with The Conference Board's national report.
Zions Bank also released its Wasatch Front Consumer Price Index Tuesday. Led by a decrease in gasoline prices, the index dropped .3 percent from September to October on a non-seasonally adjusted basis. Over the last 12 months, prices have increased in Utah by 1.2 percent. Nationally, the Consumer Price Index fell .3 percent from September to October and increased only 1 percent over the past 12 months.
While that is good news for consumers who can pocket the savings, Shumway said optimal growth would show inflation nationally running between 2 and 3 percent.
For the second consecutive month, falling gasoline prices were the impetus for the decline in the Zions Bank CPI. Consumers paid about $3.44 per gallon of gasoline in October, compared to $3.58 in September. There are some places in the Salt Lake Valley where the price is currently below three dollars a gallon.
Food prices were down .7 percent the last month, primarily due to a decrease in produce and dairy products. Over the past 12 months, the price of food at home has gone up .6 percent, well below the historic average annual increase of 3 percent.
In other categories, clothing costs increased .5 percent, recreation, medical care and housing prices increased slightly, while utility prices decreased .7 percent.
"As the holiday spending season rapidly approaches, consumers must be pleased by the rate at which we are seeing gasoline prices fall," said Anderson. "Low gasoline prices, and at least a temporary resolve of the political gridlock in Washington, D.C, should go a long way toward restoring consumer confidence in the economy and spurring consumer spending."
Shumway and Beth Holbrook, director of Zions Business Resource Center, used the press conference to tout the importance of small businesses to the economy.
Shumway said that small business, defined as a company with one to 500 employees, provides 50 percent of the gross national product in the United States and said that 13 times more patents emerge from small businesses that bigger companies.
Holbrook said that the number of people wanting to start businesses has increased in recent years.
"That's the result of consumer confidence," she said. "People feel as though they can take a risk and actually do it."
She said the Zion Business Resource Center has been in operation since 2006. It helps potential business owners develop business plans, obtain funding and provides information on accountants and lawyers who deal with small businesses. It has helped more than 5,000 companies since 2006 and will offer free monthly seminars starting in January.
In other findings in the Consumer Attitude Index Survey, Utahns said by a wide margin felt as though their state government was doing a much better job than the federal government in managing the economy. Only 19 percent of Utahns think it is likely the U.S. Economy will improve over the next 12 months, up from an all-time low of 14 percent last month.
The study showed that consumers are more optimistic about their home values and their 401Ks, a good sign for businesses selling gifts during the holiday season because such confidence is often a major determining factor when it comes to discretionary spending.