As the holiday spending season approaches, Virginians have weighed in on their opinion of the economy. The Roanoke College Institute for Policy and Opinion Research (IPOR) surveyed 603 Virginians about their financial situation, general business conditions and their inclination for purchasing durable goods. Indexes of current conditions, consumer expectations, and consumer sentiment were constructed. This is the first gauge of Virginia confidence, and it will be repeated in February 2012.
Virginians Optimistic about the Future
The IPOR developed three indexes of consumer confidence in Virginia modeled after the University of Michigan’s widely publicized set of indexes measuring national consumer sentiment. The Virginia Index of Current Conditions (VAICC) considers household financial situations compared to the past year and consumers’ willingness to purchase durable goods such as refrigerators and furniture. The Virginia Index of Consumer Expectations (VAICE) gauges household expectations of their finances and business conditions in the coming year. The Virginia Index of Consumer Sentiment (VAICS) is an aggregate measure of current conditions and future beliefs of Virginia households.
The November VAICC is 64, compared to the preliminary national value of 76.6. This was the highest for the national number since June, although the number is well off the 90-100 range sustained during the mild recession of 2001 and the 111.3 in the first quarter of 2007. The national number has not gone above 90 since January 2008. Specifically, 44% of Virginians felt they are worse off financially now than they were a year ago and 60% reported that they thought business conditions were worse today than they were a year ago.
The VAICE is 76, suggesting that households are optimistic that their financial situation and business conditions will improve over the next year. Nearly a third, (32%) of Virginians reported a belief that they would be better off financially a year from now. Comparably, the nation is less optimistic about the coming year. The national preliminary ICE is 56, although the national number considers expectations over the coming five years, rather than just one year from now.
The VAICS is 70, which is higher than the preliminary national value of 64.2. The national preliminary values are based on a sample of 250 to 300 consumers. The final national November values will be released November 23, 2011. Potential reasons for the greater optimism in Virginia versus the nation include a statewide unemployment rate that is 2.5 points lower than the national rate of 9.0% and per capita income that is more than 10% higher than the national average.
Optimism lower in Southside and Southwest Virginia
The economic situation varies substantially across the state. The VAICC is lowest in Southwest Virginia (55) and Southside (58), and highest in NOVA (73). Almost 59% of Southwest Virginians reported being worse off financially today compared to a year ago. Residents of Southside Virginia demonstrate optimism about the coming year, reporting a VAICE of 72, compared to 66 and 83 for Southwest and NOVA, respectively. Variations in consumer confidence reflect differences in regional economic outcomes. Unemployment rates are highest in Danville (9.5%, Bureau of Labor Statistics, September) and lowest in Charlottesville (5.4%, BLS, September), although optimism could be improving in Southside due to the considerable drop in unemployment in that region in the past year (falling from 12.0% in the summer of 2010.)
Confidence and Spending
The fourth quarter of the year is typically a big time for retail sales. Additionally, holiday travel is anticipated to increase this year. As consumers feel more confident about the future of the economy, and travel more during the holidays, the quarter could be a plentiful harvest for Virginia businesses.
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem between November 7 and November 15, 2011. The sample consisted of 603 residents of Virginia. Questions answered by the entire sample are subject to a sampling error of plus or minus approximately 4 points at the 95 percent level of confidence.
A copy of the questions and all frequencies may be found on the Roanoke College web site: roanoke.edu/News_and_Events/Campus_News/RC_Poll_Nov_2011.htm