Americans Take Contrarian View of Economy

Much of the recent news about the U.S. economy has been bad. The Federal Reserve made comments about the effect of the eurozone troubles on America. The stock markets have sold off for that, as well as worry that GDP growth will falter. Unemployment improvements have stalled. The only good piece of news for most Americans is that gas prices are down.

The bad news has not stopped the attitude of many Americans from brightening. A new poll from Gallup shows:

Americans’ expectations for their personal financial situations have recovered from the low point of four years ago, with 63% now saying they expect to be better off a year from now, up from 52% in late May/early June 2008. The 18% who say they will be financially worse off in a year is by one percentage point the lowest since 2003.

The numbers have returned nearly to those of 2007 — before the awful recession began. However, Gallup points out that the number of Americans who think their current financial situations are good has not recovered to early 2007 levels.

Economists frequently remind the media that consumer spending is more than two-thirds of gross domestic product. Consumer caution, if it continues, will keep any GDP increase around 2%, if the past few months are any indication. That means the real proof of consumer sentiment improvement will come around the holidays, at the earliest, assuming Gallup is correct. Holiday spending has been the best test of consumer confidence for many years. Americans may know more about 2013 tax cuts by the fourth quarter. And they will have heard more about unemployment and the general state of the U.S. economy.

So, the question about the economy as it moves toward the end of the year is whether consumers will see their shadows before the New Year and push any real recovery into 2013 — that is, if there is any real recovery near-term at all.

Methodology: Results for this USA Today/Gallup poll are based on telephone interviews conducted May 10 to 13, 2012, with a random sample of 1,012 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia.

Douglas A. McIntyre