O.C.’s Consumer Confidence Takes a Beating, Poll Finds

IRVINE —  As belt-tightening employers cut payrolls and hold the line on wage increases, Orange County consumers have lost their typically upbeat attitude about the economy, a survey shows.

Calling the finding “shocking,” UC Irvine pollster Mark Baldassare said Tuesday that the results are the first to show that local consumers have become nearly as pessimistic about the economy as the nation as a whole. The results point to a long, slogging economic recovery, he said.

Stagnant income levels combined with rising living costs appear to be at the heart of local consumers’ pessimism, said Baldassare, a professor of social ecology.

The findings are part of the Orange County Annual Survey, which the university has conducted since 1981.

The poll is especially telling, Baldassare said, because it was taken last month as the stock market was hitting new highs and economists were proclaiming the recession’s end.

Orange County residents have always believed that the local economy was healthier than the national economy, Baldassare said. “Now Orange County residents are just as down about the economy as Americans nationwide,” he said.

The Orange County Consumer Confidence Index, which plunged a record 20 points as the recession began last year, fell an additional point to 84 this year. That was only slightly higher than the national index’s reading of 82.

In 1986-89, the Orange County index ranged from 104 to 109 and typically was about 10 points higher than the national index published by the University of Michigan. To calculate both measures, the same five questions about consumers’ outlook, spending and personal finances are used. The indexes measure current attitudes against a base level of 100 established in the national survey in 1966.

A likely explanation for the local pessimism, Baldassare said, is that the median annual household income in the county remained unchanged in 1991: $49,000. That marks the first time since the consumer portion of the survey began in 1986 that household incomes have not increased.

And an increase of nearly 5% in the cost of living index for the county in the past year means that many families have less money to spend than before.

Almost two-thirds of the survey’s respondents described their current financial condition as either worse than or the same as last year’s. Nearly half did not expect things to improve in the next 12 months.

“People are not seeing the kind of income growth now that they have seen in the past,” Baldassare said, “and that leads them to believe that things are not as good as before.”

The results did not surprise Kenneth Ackbarali, senior economist for First Interstate Bank in Los Angeles.

“In back of that negative attitude, which prevails throughout California, is that this state, compared to the rest of the nation, has some special problems,” he said.

Ackbarali noted that real estate development--an industry that is particularly important in Orange County--has been in bad shape statewide for several years, “and conditions, especially in commercial and retail construction, are not improving.”

So, he said, survey respondents who worked in real estate or related fields “would have a pretty negative outlook.’

In addition, he said, California is the only western state--and one of just about a dozen states nationally--that is losing employment this year. Cuts in defense spending, which have hurt aerospace companies, have had a negative impact on consumer optimism.

The UCI consumer attitude survey, which polled 1,002 adult residents by phone from Sept. 4 through Sept. 21, has a margin of error of plus or minus 3 percentage points. Findings of the entire Orange County Annual Survey--which is supported by donations from 35 county corporations, public agencies and foundations--will be released in December.

In years past, Baldassare said, county residents have viewed the local economy as somewhat insulated from the problems affecting the rest of the nation.

But the latest survey shows that people are seeing “evidence of some rather serious problems in the California economy--particularly the budget deficit and tax situation--combined with changes in the local real estate market,” he said. “Suddenly, our economy has become like any other.”

While half of the county residents polled said they believe that their own financial situation will improve in the next year, just 41% think that the national economy will perk up--while 45% think that it will get worse.

Those figures are virtually unchanged from last year.

The poll also found that 50% of the respondents predict bad times for the national economy through 1996. That long-range outlook is less pessimistic than the 55% who predicted five years of bad times in the 1990 poll but remains substantially bleaker than in 1989, when just 39% had a negative response.

On the up side, 40% said they believe that the U.S. economy will be strong over the next five years, up from 30% in last year’s poll.

Baldassare said that rather than bolstering confidence, recent world events--the Persian Gulf War, the collapse of communism in the Soviet Union and the national recession--have made people cautious about spending.

“But it’s encouraging that residents are somewhat more positive about the national economy in the long term, which means they see an end in sight to some of these problems,” Baldassare said.

County consumers are more upbeat about buying major household items, such as appliances, than they were last year. Fifty-two percent said they think this is a good time to make a major purchase, up from 46% in 1990.

The most optimistic consumers were those in the 18-34 age group, 46% of whom said they are optimistic about their personal finances.

Overall, the consumer confidence index is 13 points higher for young adults than for older ones, Baldassare said.

Thus, the under-35 group provides “our one glimmer of hope for retail and service industries in Orange County” as the key holiday shopping season approaches, he said.

CAUTIOUS CONSUMPTION: Mall shoppers lend credence to poll’s pessimistic statistics. D1

Dour Consumers

Orange County consumers are suddenly as pessimistic about the economy as the rest of U.S. Orange County: 84 United States: 82 Index measures change in consumer confidence from a 1966 base of 100.

Source: UC Irvine