The Roller Coaster Of Consumer Sentiment

American Demographics, Feb 1, 2003

Byline: Seema Nayyar

In ancient Rome, priests would read entrails to predict the future. These days, business analysts examine the consumer mind-set to get advance notice on where the economy is headed - toward a recovery or the dreaded double-dip recession.

Fortunately, a handful of organizations can help us divine the mood of consumers, and two authoritative groups - the Conference Board and the University of Michigan's Survey Research Center - conduct monthly surveys to gauge consumer sentiment toward the economy, jobs and personal finances. The surveys' monthly findings, in the form of the Consumer Confidence Index and the Index of Consumer Sentiment, have become reliable indicators of our economic health. And in recent years, the indexes have become wildly popular, from Main Street to Wall Street, as retailers learn whether consumers are feeling loose with their wallets and individual investors look for signs that augur whether the Dow is likely to rise or drop.

But how do these consumer confidence surveys work? And just how accurate are their results? We dispatched Contributing Editor Michael J. Weiss to find out, and his cover story, "Inside Consumer Confidence Surveys" (page 22), is an eye-opener. Not only did he discover just how prescient the indexes are at predicting future economic activity, he also uncovered the backroom intrigue that occurs each month to keep the results from prying eyes eager for an early jump on whether consumers are feeling giddy or glum. Says Weiss: "Remember the movie Trading Places, when the conniving Duke brothers try to bribe a government official for a secret report on orange juice futures? That's nothing compared to the monthly shenanigans, from slick brokers and intrepid reporters, in search of a scoop."

Randy Poe, who has worked in various administrative roles at the Conference Board for nearly 30 years, says that he has twice been offered bribes for an advance look at the findings. "One individual from a brokerage house offered me a blank check to give him a two-minute jump on the release time," he says. While Poe simply laughed it off, the request does underline the value of consumer confidence surveys. Ultimately, the surveys act like sophisticated mood rings that reflect our economic well-being.

Also in this issue, we give you a glimpse into how the fast-growing multicultural market goes shopping. And it turns out that each racial and ethnic group has its own idea of what an ideal shopping excursion entails. As Rebecca Gardyn and John Fetto tell us in their story, "Race, Ethnicity and the Way We Shop" (page 30), Hispanics are more likely than the average consumer to enjoy shopping with a family member in tow. Meanwhile, African American consumers tend to drive out of their way to a factory outlet, and Asian consumers are more likely to have logged on to the Internet before they hit the stores. As both our feature stories this month demonstrate, businesses' interest in all types of shoppers is rising. Understanding what motivates consumers is more crucial than ever.