RC Poll: Virginia Consumer Sentiment and Inflation Expectation Report
Virginians have again weighed in on their opinion of the economy. The Roanoke College Institute for Policy and Opinion Research (IPOR) surveyed 700 Virginians about their financial situation, general business conditions now and in the future, their inclination for purchasing durable goods, and their thoughts on prices in the near-term. Indexes of current conditions, consumer expectations, consumer sentiment, and price expectations were constructed using methods similar to the popular national measures out of the University of Michigan. This is the fourth survey from IPOR on Virginia consumer sentiment and the third for price expectations. Both measures will be released quarterly beginning this year.
Consumer sentiment retreats over concerns of higher prices, lower income
The Virginia Index of Consumer Sentiment (VAICS) is 75, down 6 points from November 2012 (the date of the last survey). The retreat is parallel to the national number which has fallen considerably since the November election amidst the sequestration and debt debate. Of the 32 percent of Virginians reporting being worse off financially today compared to a year ago, 47 percent attribute it to higher prices while 36 percent blame falling income. Twenty-seven percent of those surveyed said that they were better off now than a year ago, largely due to income gains.
Figure 1. US vs. VA consumer sentiment
Despite falling unemployment and rising stock prices, the price of gasoline has risen by over $0.50 per gallon since November 2013 in Virginia to an average of about $3.70 per gallon. Gas prices are rising at a time when paychecks are shrinking, potentially curbing consumer sentiment.
The drop in sentiment covers both current conditions and expectations for the near future. The Virginia Index of Current Conditions (VAICC), an indicator addressing current household finances and ability to purchase durable goods, dropped to 76, down 6 points since November. Household fears about the future also increased, driving the Virginia Index of Consumer Expectations (VAICE) down by 6 points to 73.
Big gains in Northern Virginia, big losses in Shenandoah Valley
Perceptions differed substantially across regions of the Commonwealth. Northern Virginia and the Tidewater reported the strongest sentiments of the six regions, both areas of strong employment growth. The Tidewater is essentially unchanged since November, despite looming cuts to the defense budget which are likely to impact the defense-driven local economy. Northern Virginia rebounded dramatically since the election, with all three measures returning to their values from a year ago.
Figure 2. Indexes by Region
Comparatively, the indexes for the Shenandoah Valley fell from their November highs to amongst the lowest values across the Commonwealth and the lowest values for the region in the past year. In particular, 61 percent of households surveyed in the Shenandoah Valley report being worse off financially now than a year ago. The region employs a high proportion of its labor force in the manufacturing sector, but has been able to weather the economic storm by creating jobs in trade, transportation, utilities, education and health sectors. The coming months will show if the dramatic reduction in sentiment is due to a greater sensitivity to rising gas prices and political debate or merely a statistical anomaly.
Increases in short- and long-term views on prices
Inflation expectations increased considerably since November. Virginians report that they believe prices will grow by 3.5 percent over the next year, up from the 2.2 percent growth rate reported in November. National price expectations are also on the rise, and are estimated to be 3.3 percent over the coming year. The long-term outlook on prices has also dimmed, with the typical Virginian expecting inflation of 4.2 percent in the coming 5-10 years, up 0.6 percentage points since November.
Figure 3. US vs. VA price expectations
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. between Feb. 18 and 20, 2013. The sample consisted of 700 residents of Virginia. The sample of phone numbers was prepared by Survey Sampling Inc. of Fairfield, Conn. and was created so that all residential and cell phone numbers, including unlisted numbers, had a known chance of inclusion. Nearly 20 percent of respondents were contacted via cell phone.
Questions answered by the entire sample of 700 consumers are subject to a sampling error of plus or minus approximately 4 points at the 95 percent level of confidence. This means that in 95 out of 100 samples like the one used here, the results obtained should be no more than 4 points above or below the figure that would be obtained by interviewing all consumers who have a telephone. Where the results of subgroups are reported, the sampling error is higher. Sampling weights were constructed using Virginia Census 2010 data by age, race, and gender groups.
A copy of the questions and all frequencies may be found here.
- Dr. Alice Kassens
- (540) 375-2428 (office), (cell)