By Billie Greer.
The confidence of Los Angeles County consumers, which has been steadily declining since year end 2016, has leveled off somewhat but concerns about the economy continue.
Released last week by the Lowe Institute of Political Economy at Claremont McKenna College, the Los Angeles County Consumer Sentiment Index for third quarter 2017 shows that consumers continue to be worried about the current state of the Los Angeles economy with confidence dropping 4.6 percent on the heels of a 5.9 percent decline in the second quarter.
The index is generated by an alliance between Claremont McKenna College and Chapman University. Given that consumption accounts for, on average, 70 percent of all U.S. economic activity, the importance of gauging consumer confidence cannot be overstated.
Although consumer attitudes in Los Angeles County appear to have stabilized over the last two quarters, survey respondents seem to have adopted a wait-and-see attitude.Marc Weidenmier, professor of economics and finance at Chapman University, notes that although consumers likely recognize the economy is growing, yet slowly, there is uncertainty as to how issues that have ramifications for business and the economy, including healthcare, immigration and tax reform, play out.
Weidenmier points out that Los Angeles is among the areas in the nation most at risk from current federal policy priorities, noting that, since immigrants make up a large sector of the workforce, the repeal of DACA or significant deportation both have the potential to dampen the area’s growth and prosperity. “Further, there is a large import/export segment of the area economy which continues to be threatened by efforts in D.C. to curtail international trade,” he concluded.
The 500-person survey asked respondents about their current situation, perceived prospects and spending plans. People were asked to assess whether they see their financial situation getting better or worse over the coming year and how this is linked to their perception of recent business conditions in Los Angeles and in the nation.
A review of the data shows few differences among those surveyed with respect to age, ethnicity and income. However, there were some distinctions. Consumer confidence among those 45-54 years of age increased 17.5 percent, but sentiment among seniors declined nearly 14 percent. And, there was nearly a 20% decline in confidence of respondents with annual earnings between $100,000 – $150,000.
Despite respondents’ growing concern for their personal financial situation in the coming year, there is a potential bright spot. Despite a steady decline over the last several quarters, the recent survey shows that those considering purchasing an automobile next year has increased by 5.4 percent. This is good news as automobile purchase is considered a key economic indicator.
Los Angeles is the only major metropolitan area in the U.S. with its own consumer sentiment survey and is a signature project for the Lowe Institute. “We, along with our partner, Chapman University, have made a significant investment in the Index to make this tool available to aid in planning and decision-making by individuals, businesses and government leaders,” said Robert J. Lowe, co-founder of the Lowe Institute and Chairman of Lowe Enterprises, a national real estate company.
Looking ahead, will Los Angeles consumers continue to be cautious or will confidence in the economy tick upward? How consumers react to the question — Is there a new car in your wallet? — may provide a clue.