New poll: Consumer confidence dropping in Arizona

Arizonans' confidence that things will get better is slipping again, a result that by itself may keep the economy from improving.

Overall Arizona consumer confidence now stands at 49.1, a scale that is based on 100 being how residents felt in 1985. Pollster Earl de Berge said that compares with 49.6 in April and 50.2 at the beginning of the year.

Three years ago the index was at 101.9.

The index is more than a snapshot of consumer attitudes. It reflects whether Arizonans are willing to spend money.

That is borne out in a separate question asked by Behavior Research about spending plans for the coming six months.

In January, more than 16 percent of those asked said they were definitely or probably going to purchase a major kitchen appliance within the following six months. That figure is now down to just 7.3 percent, with fewer than 2 percent saying they definitely will make such a purchase.

Also down are the number of Arizonans planning to buy a new car or truck, furniture, expensive new entertainment or computer equipment or undertake a major remodeling of their home.

Lee McPheters, a research professor at the W.P. Carey School of Economics at Arizona State University, pointed out the state's 9.6 percent jobless rate for June, while unchanged from the prior month, actually is now higher than the national figure. He said that is a sign that, unlike some prior economic downturns, Arizona is not going to be among the first to recover.

More to the point, he said consumer confidence won't improve until job creation picks up.

"They're thinking, ‘Am I going to be next on the unemployment rolls?'" McPheters said. "It's not a situation where if you lose your job you can jump to some other job."

And McPheters said he doesn't see major job growth before the end of the year.

One problem, he said, is that consumer confidence becomes a vicious cycle.

If people are unsure about their future, they don't spend. And if they don't spend, Arizona's economy doesn't improve.

"If everybody feels that this isn't the time to buy, then your measure of car sales and furniture sales, trips to Target and all of that, they're cut back. People don't eat out as much," McPheters said. "So we're just kind of stuck until the Arizona economy starts creating jobs again."

But Dennis Hoffman who heads the L. William Seidman Research Institute at the Carey school, has a different theory behind the falling confidence: Psychology of wealth.

"Wealth has really eroded across the nation and here in Arizona," he said. That includes not only what people have in their stock portfolios and retirement accounts, but also the values of their homes.

Until that builds back up, Hoffman said, people won't spend on big-ticket items.

The index is composed of several components including attitudes about how people see their current situation and what they foresee down the road six months from now.

In this case, what's driving down the index is that forecast, particularly on the personal level.

Three years ago, one out of every four Arizonans said they expected family income to be higher in the coming six months. That figure is now just 15 percent.

Conversely, only 4 percent of those questioned in July 2007 thought they would be bringing home less money in the following six months. That is now the view of 13 percent of those questioned.

Hoffman said that lack of willingness to open their wallets for major items isn't just shown by the consumer confidence survey.

He said total spending on vehicles in Arizona last year is close to the same as it was in 1998, even though the state's population is up by close to a third.

He said, though, there may be factors beyond jobs and wealth perceptions that are affecting that.

"It could be baby boomers getting older and having enough toys," Hoffman said. "Maybe we don't need to buy much any more."

And, he said, maybe people who aren't worried about their own income are fearful of the situation for their children.