RC Poll: Va Consumer Optimism Wanes, Prices Remain Stable
Virginians weighed in on their opinion of the economy for the fourth time this year. The Roanoke College Poll interviewed 608 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- and long-term. Indexes of current conditions, consumer expectations, consumer sentiment and inflation expectations were constructed using methods similar to the popular national measures out of the University of Michigan. This is the seventh survey from IPOR on Virginia consumer sentiment and the sixth for inflation expectations. Both measures are released quarterly beginning this year.
Sentiment falls across the Commonwealth
The Virginia Index of Consumer Sentiment (VAICS) fell to 76.4 in November, down almost 9-points from August, the date of the last report. The retreat follows two consecutive quarters of improvements. Sentiment in Virginia is on par with the nation, which reported a preliminary value of 72.0 for November. Figure 1 illustrates sentiment values for Virginia and the United States over time.
Figure 1. Consumer sentiment over time, Virginia and the United States
US data downloaded from FRED 11/20/2013; blue line is US Consumer Sentiment; black line is a two year moving average; orange bars are VA Consumer Sentiment
Sentiment about the future economy and household finances is down by more than 8-points since August, reversing its upward trend. The Virginia Index of Consumer Expectations (VAICE) fell to 74.3. The preliminary national measure of expectations is 62.3. Virginians are considerably more optimistic about the future of the economy than the nation as a whole. Over 41 percent of those surveyed believe that the next five years will be a period of high unemployment and recession. This is particularly true of men (45 percent), Republicans (55 percent), and low income households (49 percent). Democrats (43 percent) and blacks (39 percent) are more likely to believe the coming years will be a time of economic prosperity than contraction.
Virginians report being worse off financially today than a year ago and that business conditions have softened. The Virginia Index of Current Conditions (VAICC) fell by more than 9 points since August to 79.5. The nation is considerably more positive on the current conditions as the University of Michigan reports a preliminary current conditions value of 87.2, an 8 point drop since August. The Virginia-US gap concerning current conditions has widened in recent months. Forty-seven percent of Virginians believe that business conditions are worse today than a year ago. This is particularly true among high income households (48 percent), Republicans (74 percent), whites (55 percent), and those with less than a high school education (57 percent). Figure 2 shows the three indexes for both Virginia and the United States.
Figure 2. Consumer Indexes November 2013, Virginia and United States
Waning sentiment in the Commonwealth and the nation could stem from a variety of sources. Since August 2013, the nation has experienced a government shutdown, a flat labor market, uncertainty about potential increases in the minimum wage and the impact of health care reform, and a volatile stock market. The Commonwealth in particular witnessed a vitriolic gubernatorial race in early November. It is likely a combined effect of these experiences that is pushing sentiment down.
Big slide in Southwest Virginia, gain in Southside
Southwest Virginia experienced a dramatic decline across the three indexes, including an almost 30 point drop in the VAICC. This area of the Commonwealth is the heart of coal country. The November elections and the debates over coal may have particularly dampened sentiment in the region. The coal industry is a large source of jobs in the area, and policies that would potentially shrink the coal industry were a topic of debate during the 2013 election, particularly the gubernatorial race.
Southside Virginia reported a 12 point increase in the VAICC, putting it on par with regular quarterly leaders Northern Virginia and the Tidewater. Potential reasons for the surge in confidence about the current economy include the recent announcement by Microsoft to locate a new data center in Boydton, VA. Microsoft plans to invest a reported $499 million dollars in the project, a financial boon to the area. Additionally the labor market in Southside is improving. Danville recently experienced job growth as reported in the latest state employment report.
Figure 3. Indexes across the Commonwealth, November 2013
Short- and long-term inflation expectations unchanged
Short-term inflation expectations, shown in Figure 4, held firm since the first quarter of 2013 at 3.5 percent. Almost 63 percent of Virginians believe that prices will rise in the next year, continuing a downward trend that began in February 2013. In contrast, national short-term inflation expectations have not been above 3.5 percent since August 2012 and were 3.1 percent in November 2013 (preliminary). Meanwhile, long-term inflation expectations in Virginia remained at 5 percent in the fourth quarter of 2013. This value is considerably higher than the national long-term inflation expectations of 2.9 percent. Close to 82 percent of Virginian respondents believe that prices will rise in the next five to ten years, a value that is slightly lower than last quarter.
Figure 4. Short-term inflation expectations over time, Virginia and the United States
US data downloaded from FRED 11/20/2013; blue line is short-term price expectations; black line is a two year moving average; green bars are VA short-term price expectations
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va., November 11-14, 2013. The sample consisted of 608 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 30 percent of respondents were contacted via cell phone.
Questions answered by the entire sample of 608 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 Louise Kassens, Senior Analyst, IPOR
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