Regional Consumer Confidence Drops Sharply; Local Residents Hit Hard by Higher Gas Prices

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FAYETTEVILLE, Ark. — In line with the nation as a whole, consumer confidence among Northwest Arkansans plunged dramatically in September, according to researchers at the University of Arkansas Survey Research Center. The center released findings Wednesday from the Northwest Arkansas Omnibus Survey. As reported in the survey, the Index of Consumer Sentiment for Northwest Arkansas dropped 15 points -- from 92.7 to 77. 2 -- from July 2005 to September 2005.

“The rapid and large drop in consumer sentiment locally means Northwest Arkansans’ confidence in the health of the economy has been shaken by Hurricane Katrina and rising fuel prices,” said Molly Longstreth, director of the research center. “Nearly two-thirds of the people we polled said changes in gas prices had affected their lifestyle 'a lot’ or 'some,’ and more than half said higher gas prices had caused them to cut back significantly on how much they drive.”

The survey demonstrated that Northwest Arkansans’ feelings about the health of the economy reflect those of Americans as a whole. In September, researchers at the University of Michigan reported that U.S. consumer sentiment dropped to its lowest point, 76.9, in more than a decade. In July 2005, the national index was 96.5. Economists attributed the decline to nervousness among Americans about the health of the nation’s economy as a result of Katrina.

The Index of Consumer Sentiment measures consumers’ attitudes about current and future economic conditions. Started more than 50 years ago at the University of Michigan, it is the standard by which economists, investors and policymakers predict future economic conditions because they know consumer spending accounts for approximately two-thirds of U.S. economic activity. Longstreth said the results measure consumer morale, which is closely linked to consumer investment. For example, economists have demonstrated that people will spend more freely when they are optimistic about the economy. When consumers are pessimistic, they tend to save money and pay off debt rather than purchase items.

Longstreth said the index is usually stable from month to month. Monthly increases or decreases of more than six points are rare. Large changes usually occur over a period of several months, she said.

Despite the two-month, 15-point drop for Northwest Arkansas, the survey showed that local residents are slightly more optimistic about the economy than Americans as a whole. This was a switch from July 2005, when Americans as a whole were more optimistic about the economy than were Northwest Arkansans.

The index score is determined by local residents’ answers to several questions, including their opinions on whether they are better or worse off financially than last year and whether now is a good or bad time to purchase large household items, such as furniture, appliances and televisions. The survey reported that almost three-fourths of Northwest Arkansans said they are better off or the same financially than they were one year ago. Slightly more than a quarter, 26.4 percent, said they were worse off than one year ago.

More than one-third of the respondents said now is a good time to purchase a large household item. Almost one-third said the present is a bad time to purchase a refrigerator, stove or television, and 31.2 percent said they were uncertain whether now was a good or bad time to purchase such an item.

The survey reported that 85 percent of local residents think their economic status will improve or be the same one year from now. Slightly less than 15 percent said they expect to be worse off financially in one year.

Perhaps most telling were the Northwest Arkansans’ answers to questions about Hurricane Katrina and rise in gas prices. As Longstreth mentioned, the survey reported that more than 60 percent of local residents said that their lifestyle had been affected “a lot” or “some” by changes in gas prices. Only 14.6 percent said they had not been affected at all.

“Almost two-thirds of Northwest Arkansans have been affected by the rise in gas prices,” Longstreth said. “This means people are thinking seriously about things they can do to reduce expenses.”

In addition to the majority of respondents who said they had cut back significantly on their amount of driving, 30 percent said they had altered summer or fall vacation plans because of high gas prices, and almost two-thirds of the respondents said they had made more of an effort to find the gas station with the cheapest gas. Half of those who participated in the survey said they are seriously considering a more fuel-efficient car the next time they purchase a vehicle.

The survey indicated that as many as two-thirds of all Northwest Arkansans have donated money to Hurricane Katrina relief efforts. Forty-five percent of the respondents have donated goods, and 16 percent have donated time to relief efforts. More than 10 percent of all respondents said they had lost property or their business had been affected because of the hurricane. Three percent were providing shelter for an individual or family who had lost a home, and another 3 percent said they had lost a family member or friend because of Katrina.

Conducted in English and Spanish, the Northwest Arkansas Omnibus Survey is a service-oriented poll measuring Northwest Arkansans’ perceptions about the local population and health of the local economy. The survey uses random-digit dialing to contact a wide sample of residents from Benton, Carroll, Madison and Washington counties. Longstreth said the center polled 610 people, and findings are accurate within a range of plus or minus 4 percentage points.

The research center will conduct the survey twice a year. Longstreth said survey findings are an excellent and affordable way for public agencies, nonprofit organizations and educators to obtain high-quality information from a wide variety of Arkansans without the organizations having to sponsor their own surveys. Those interested in purchasing questions for the next survey, to be conducted in January and February 2006, should call the center at (479) 575-4222.

Established in 1998, the UA Survey Research Center conducts surveys and evaluations for a variety of organizations and is dedicated to providing high-quality, nonbiased information. For more information on the center and its research, go to http://survey.uark.edu/ .

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