Despite a turnaround in the stock market and signs of recovery, a new survey by Citigroup [C] revealed that American consumers still feel pessimistic about the economy, both nationally and locally.
The telephone survey conducted by Hart Research Associates found that consumers feel their personal financial situation is little or no better than it was a year ago. The survey was conducted with 2,002 adults nationally from March 15 to 25, and has an overall statistical margin of sampling error of plus or minus 2.5 percentage points.
Forty four percent of Americans rated the economy as fair, 36% rated it as poor and 52% said their financial conditions are about the same as they were at this time last year. Thirty three percent of Americans say they are worse off financially, compared to 15% who say they are better off financially than they were a year ago.
More troubling is the fact that consumers think there is still pain to come. Only 36% of Americans believe the economy has hit bottom, compared to 33% last September who believed it had hit bottom. Meanwhile, 59% believe the economy has a long way to go before hitting bottom. Last September 63% felt the economy still had a long way to go. “The data reveals that the public still believes the end of the downturn is some distance off,” Citi said.
“These survey results are a bit of a reality check on the economic recovery,” Jonathan Clements, Director of Financial Education, Citi Personal Wealth Management, said in a press release Thursday. “They show most Americans for now are still feeling hunkered down financially. These results speak to the powerful and enduring impact of the financial crisis on the American psyche.”
What does this lack of confidence in the economy and their financial futures mean?
Those surveyed, who were from all income levels and ethnic groups, said they plan to remain conservative about their spending in the near future. Twenty-seven percent of Americans continue to believe that the current environment is a fair time to make a major household purchase, while 34% believe it is a poor time. These results are virtually unchanged from six months ago.
“As long as these views prevail, it will likely slow the recovery,” warned Clements.
Fifty-five percent of those surveyed said that over the next six months they will focus primarily on reducing their level of debt. If survey respondents were to receive any extra money over the next six months, 38% said they would save extra money, 32% said they would use extra money to pay overdue bills, 18% said they would invest the extra money, and only 10% said they would spend any extra money.
“People's conservative stances are likely a reflection of the current unemployment picture, which has not seen the same kind of rebound as the stock market. Our 'Economic Spring' is expected to come, just several more months down the road,” Clements said.