We’re starting to see signs of growing confidence in the U.S. economy, following the biggest economic swan dive since the Great Depression. The question is: Will consumer and small business owner attitudes toward spending begin to shift as a result?
Last month I heard Dennis Jacobe, Ph.D. and chief economist for Gallup, speak at the Custom Content Council’s annual conference in Washington, D.C. The title of Jacobe’s presentation? “The ‘New Normal’ in Today’s Marketing World.”
If you’re a marketer trying to explain away recent years’ lousy results, or searching for data on which to base future projections, here’s some of what Jacobe had to say about where the U.S. economy has been — and where it appears to be trending. You can download his full presentation at the Custom Content Council (CCC) website.
Confirming a “New Normal”
Since January 2008 Gallup has conducted a nightly “Gallup Daily” phone poll phone with a randomized sampling of 1,000 U.S. consumers. The poll seeks to gauge both economic attitudes and actual discretionary spending behavior.
Gallup Daily data appears to confirm existence of a “new normal” for U.S. consumers and their attitudes toward spending. When asked, “Are you the type of person who more enjoys spending money (or who) more enjoys saving money?” Gallup found that in Q2 2011 the gap between “more enjoy saving” and “more enjoy spending” was as wide as its been in favor of saving since they’ve tracked the question, dating back a decade to April 2001.
When asked if spending less is a temporary change, or something they considered a new, normal pattern, it seems consumers are calcifying in their attitudes toward save more, spend less:
|April 2008||Feb. 2010||Q2-2011|
|Spending less will become a new, normal pattern||53%||61%||64%|
|Spending less is a temporary change||45%||37%||36%|
Small business owners presented a more mixed outlook, according to the Wells Fargo/Gallup Small Business Index. When asked in 2011 if they were spending more, the same, or less, 42 percent said less, 29 percent said the same, and 29 percent said more. Just over half, 51 percent, saw their recent spending pattern as temporary, while 49 percent considered it a new normal.
When it comes to borrowing money, however, small business owners appear to be battening down their hatches, with 41 percent saying they were borrowing less, 45 percent the same, and only 14 percent more. Sixty-eight percent said they saw their current approach to borrowing as a new normal.
Actual Discretionary Spending Down
Gallup Daily tracking shows average daily discretionary spending by consumers bumping along at the $63 level in January and February this year, compared with a high of $114 per day in early 2008. Average daily discretionary spending has declined significantly between 2008 and 2011 across all income categories tracked by the poll:
- $90,000+: -17%, from $146 to $121
- $60,000-$89,999: -25%, from $109 to $82
- $24,000-$59,000: -31%, from $88 to $61
- less than $24,000: -38%, from $66 to $41
Will Spending Rise With Confidence?
Despite these attitudes and behaviors regarding spending, Gallup found that consumers’ economic confidence was as high in February as it’s been since January 2011, and February marked the six straight month of increase. \
- Consumer confidence is highest among higher income households, but is increasing across all income levels.
- People who self-identify as Democrats tend to be considerably more optimistic about the economy than Independents and Republicans, with Republicans by far the least optimistic. In fact, Republicans are the only one of three groups who feel less optimistic about the economy today than they did in January 2011.
- Consumers saw their employers doing more hiring and less firing, continuing a trend that has been steady since January 2010.
Similarly, the Wells Fargo/Gallup Small Business Index takes the temperature of small business owners on subjects that include their overall financial situations, revenue, cash flow, capital spending, hiring, and ease of obtaining credit. In January this year:
- The index found small business owners were as optimistic about the future as they’ve been since the last quarter of 2008.
- When asked about their intentions to either hire or downsize their workforces, small business owners’ hiring intentions were as high as they’ve been since early 2008.
So, What’s a Marketer to Do?
As a closing message to his CCC audience, Jacobe provided this “on the upside, on the downside” observation:
- Average daily discretionary spending for March 2012 hit $76, the highest it’s been since January 2008, a possible sign consumers are ready to break out of their new normal spending habit.
- Rising gas prices have the potential to diminish consumer confidence and push discretionary spending back down toward new normal levels, which since January 2009 have been in the low to mid $60s. The closer gas prices get to $5 per gallon or over, he said, more dramatic the impact on consumer lifestyle and spending.
Jacobe’s parting advice for business managers, in light of the prevailing “new normal” that might (or might not) be with us for a while: Strive to balance optimism and realism. Focus on organic growth through greater customer and employee engagement. “There’s nothing wrong with adhering to strong fundamentals,” he said. “There’s nothing wrong with sustainable growth.”
What’s happening in your business? Are you factoring a “new normal” into your marketing and sales forecasts? Or has the recession long ago disappeared in your rear view mirror? Comments welcome.
This post originally appeared on Hanley Wood Marketing’s blog, Content Is Marketing.