Virginians have again weighed in on their opinion of the economy. The Roanoke College Institute for Policy and Opinion Research (IPOR) surveyed 616 Virginians about their financial situation, general business conditions now and in the future, their inclination for purchasing durable goods, and their thoughts on prices in the near-term. Indexes of current conditions, consumer expectations, consumer sentiment, and price expectations were constructed using methods similar to the popular measures out of the University of Michigan. This is the second survey from the IPOR on Virginia consumer sentiment and first for price expectations. Both measures will be released annually in February and November.
Virginians Remain Relatively Optimistic about the Future
The IPOR developed three indexes of consumer sentiment 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 consumer 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 February VAICC is 78, up 22 percent from November, compared to the preliminary national value of 79.6. The national number dropped more than expected from January to February, but is a slight increase from November 2011. The number remains 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. Twenty-eight percent of Virginians report being better off financially than a year ago, compared to only 23 percent for the nation as a whole. Additionally, 43 percent of Virginians feel that now is a good time to buy big ticket items, the majority citing the low prices and deals available.
The VAICE is 87, up 14 percent from November, suggesting that households are optimistic that their financial situation and business conditions will improve over the next year. Over a third, (36 percent) 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 68.
The VAICS is 83, an increase of 18 percent since November and considerably higher than the preliminary national value of 72.5. The national preliminary values are based on a sample of 250 to 300 consumers. The final national November values will be released February 24, 2012. Potential reasons for the greater optimism in Virginia versus the nation include a statewide unemployment rate that is 2 points lower than the national rate of 8.3 percent and per capita income that is more than 10 percent higher than the national average.
Optimism Highest in the Tidewater region, Central Virginia and Northern Virginia
The economic situation varies substantially across the state. The VAICC is lowest in the Shenandoah (65) and Southwest (71) regions, the only areas where the measure is below 80. Southside experienced a substantial increase in the VAICC since November (32 percent), a good sign for an area long troubled by a poor economy. The VAICC is highest in the Tidewater Region (87), which experienced a 33 percent increase in their opinion of the current conditions since November 2011. Forty-five percent of those in the Shenandoah Region reported being worse off financially today compared to a year ago.
Residents of Central Virginia, the Tidewater Region and Northern Virginia demonstrate optimism about the coming year, reporting VAICEs of 90, 88, and 91, respectively, all up from November. This compares to a VAICE of 79 for Southwest Virginia. Forty-one percent of those in Southwest Virginia believe that economic conditions over the next five to 10 years will include periods of high unemployment and overall depression.
The VAICS is 80 or above for all regions of Virginia save the Southwest Region (75). All regions showed considerable increases in sentiment from November, led by a 24 percent increase in the Shenandoah Region. Fifty-one percent of those in the Shenandoah Region believe that business conditions will improve over the coming year.
Variations in consumer confidence reflect differences in regional economic environments. Unemployment rates are highest in Danville (8.9 percent, Bureau of Labor Statistics, December 2011) and lowest in Northern Virginia, where unemployment has remained between 4.1 and 5.2 percent between December 2010 and December 2011 (Bureau of Labor Statistics.) Southside optimism could be due to considerable reductions in the unemployment rate year over year. The recent announcements of investments and jobs from Green Mountain Coffee (Windsor), Amazon (Richmond), and Albany Industries (Galax) likely contributed to the increase in VAICS.
Nearly 60 percent of Virginians think that prices will increase over the next year, and over 77 percent believe that prices will rise over the next five to 10 years. Specifically, nearly 64 percent of Virginians expect inflation to be between 3 and 5 percent over the next year, while nearly 60 percent believe that inflation will average 3-5 percent per year for the next five to 10 years. Expectations of prices and inflation play a crucial role in consumer spending and saving patterns. The prospect of higher prices can dampen consumer spending and economic growth.
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College between January 30 and February 6, 2012. The sample consisted of 616 residents of Virginia. The sample of phone numbers was prepared by Survey Sampling Inc. of Fairfield, Conn. and was created so that all residential and cell phone numbers, including unlisted numbers, had a known chance of inclusion. Nearly 23% of respondents were contacted via cell phone.
A copy of the questions and all frequencies may be found on the Roanoke College web site.