As we’ve closed out the year 2014, more than a few people – from politicians to business leaders and business journalists – have sought to reassure us that the American economy is not only on the right track, it’s back in a big way.
But evidently, word hasn’t trickled down to “John Q. Public.” Or if it has, it’s been greeted by a gigantic Bronx Cheer.
We have the latest evidence of this in management consulting firm McKinsey & Company’s most recent annual Consumer Sentiment Survey, which was conducted in September 2014 with results released last month.
The bottom-line on consumer sentiment is that despite the recent spate of decent economic news and higher employment figures, people are still reluctant to increase spending, and thriftiness remains the order of the day.
While people don’t think things are deteriorating … they don’t think they’re becoming much better, either.
So … treading water is about all.
It’s not too difficult to figure out why sentiment continues to be so skittish. After all, median household income for Americans, adjusted for inflation, actually declined in recent years and hasn’t rebounded.
With people still feeling the earnings squeeze, it’s only natural that McKinsey’s findings show consumer sentiment still in the doldrums, with only ~23% feeling optimistic about America’s economy.
Consider these further findings from the research:
- About 40% of respondents report that they are living “paycheck to paycheck”
- Around 39% are at least somewhat worried about losing their job
- Approximately 34% feel they have decreased ability to make ends meet financially
Not surprisingly, respondents with lower family incomes (under $75,000 per year) have higher concerns, and roughly 40% of those households report cutting back or delaying purchases as a result.
[Even among people living in households earning $150,000+ per year, one in five say that they’ve cut back or delayed purchases because of financial uncertainty.]
Activities we commonly associate with recessionary eras continue to be practiced by consumers. According to McKinsey’s research, those practices include:
- Looking for ways to save money (comparison shopping, coupon use, etc.): ~55 of respondents report doing so
- Purchasing more products online to save money: ~48%
- Cutting spending over the past year: ~40%
- Doing more shopping at “dollar stores”: ~34%
- No longer preferring/buying more expensive product brands over private-label substitutes: ~33%
Where things really look different “on the ground” than in the economists’ forecasts is what the public is saying about their future behaviors: McKinsey believes that consumers and their attitudes have been permanently changed by the years of austerity.
The strongest indication of this? Nearly 40% of the survey respondents say that they’ll likely never go back to their pre-recession approaches to buying and spending.
As McKinsey concludes in its report: Cautious is the new normal … and it’s unlikely to change anytime soon.
More details on McKinsey’s survey findings can be viewed here.