One More Economic Problem: Consumer Credit Worries
A new Gallup report highlights another reason why there is such dissatisfaction with the economy and why Bush's economic approval ratings are in the tank. According to the report, "Consumer Credit Worries Suggest Spending Decline":
....Right now, Gallup's economic data suggest that a collapse of consumer spending is a much higher probability than many economists within and outside of the Fed seem willing to acknowledge.
Consumers' optimism about their personal credit situations fell sharply in April, declining 18 points to 82 from the baseline of 100 established in March. The decline was most pronounced in the Future Situation Index, which declined 13 points -- from 59 to 46. Compared to March, consumers showed less confidence in their ability to continue to make their monthly payments, less optimism that they will be able to borrow in the future if they need to do so, and a reduced likelihood that they will be able to pay down their debt.
Consumers' assessments of their current credit situations also declined, as the Present Situation Index declined by 5 points -- from 41 in March to 36 in April.
Consumer economic expectations also remain highly negative:
According to a new Gallup Poll, conducted April 4-7, only 35% of consumers say current economic conditions in the country as a whole are "getting better," compared with 56% who say they are "getting worse." This difference of –21 percentage points is nearly as large as the –26 points recorded at the end of March. More importantly, it is twice the difference of –9 percentage points recorded in Gallup's March 7-10 poll, in which 41% said economic conditions were getting better and 50% said they were getting worse. Gallup's late March and early April poll results show that consumer expectations about the economy's future direction are the most negative they have been since the Iraq war began, in March 2003.
The Gallup report sums up the bleak outlook among the public as follows:
Gallup's attitudinal economic measures show consumer confidence tumbling as consumers have experienced record prices at the gas pump, increasing interest rates, stagnant wages, and slower-than-expected job growth. Investor optimism has also declined recently. And now, it appears consumers are becoming much less positive about their personal credit situations.
To this point, consumers have continued to spend even as their overall confidence in the economy's direction has declined. They have been able to do this in part by adding to their debt. In this context, consumers' growing concerns about their ability to make their future monthly payments, and borrow if the need arises, create a new threat to consumer spending. If consumers decide to slow their credit use, consumer spending on items other than food and energy may decline significantly in the months ahead.
Recently, a number of major retailers reported lower profits and slower-than-expected sales in March. One of their explanations to Wall Street was to blame their troubles on bad weather. In sharp contrast, Gallup's economic data suggest that the real cause may be a major decline in consumers' perceptions of their own personal credit situations.
No wonder Bush is getting such lousy economic approval ratings! The typical American consumer is very worried indeed about their economic situation and Bush's cheerful talk about an economy that's "strong and getting stronger" is sounding more and more out of touch with the reality of their lives.