California Consumers Losing Confidence in Economy
Higher gasoline prices, slowly rising inflation rates and a weak job market have made California consumers a tad less confident about the economy’s future.
For the fifth quarter in a row, California consumers were more pessimistic than optimistic about the economy’s future, according to a survey by economists at Chapman University in Orange, Calif.
Despite their pessimism, consumers continued to spend as much as they did in the previous three quarters. But that could change if gas prices and other economic indicators do not decline.
“Overall, inflation in California is at 4 percent, while nationally it is at 3 percent. The reason for the higher inflation rate is housing costs. That cuts down on disposable income,” said Esmael Adibi, director of the Anderson Center for Economic Research, which conducted the survey that was mailed to 5,000 California residences. The survey gets a 5 percent to 10 percent response rate.
Adibi said rising interest rates are translating into higher costs to pay off credit card debt and other loans, which could take their toll on future consumer spending. “The higher interest rates are putting pressure on people’s payments,” Adibi explained.
The university’s Composite Index of Consumer Sentiment dropped from 88.7 in the first quarter of 2006 to 79.5 in the second quarter of 2006. The index is based on consumers’ outlook on current and future economic conditions and an index measuring consumers’ future spending plans. —Deborah Belgum
