The data on consumer spending and consumer confidence continues to be mixed, although the trends increasingly appear negative. Economists say that these numbers are directionally correct. However, so many studies are issued on the subject, it is hard to know which ones are true. Statistics fluctuate so greatly that it is impossible for any report to be a single, entirely accurate reflection of what American consumers are doing now and what they will do in the future.
A case in point is the new Bankrate.com poll on consumer spending. The survey was conducted by Princeton Survey Research and covered 1,001 adults questioned by phone between September 1 and 4. The margin of sampling error for the complete set of weighted data is plus or minus 3.6 percentage points. That seems like a large spread, though statisticians would say it was not. And, who knows how many respondents distort their answers.
The results of the poll were nothing short of stunning. “Nasty headlines about the economy and stock market prompted 40 percent of Americans to reduce their spending in the past 60 days,” according to Bankrate.com. The company never explains the effect of “nasty headlines.” Rather, “Forty percent of Americans say they have cut back on spending in the past 60 days due to the roller-coaster stock market or concerns about the economy. That is how recessions are born,” said Greg McBride, CFA, Bankrate’s senior financial analyst.
There is no doubt that most consumers have become more cautious since the spring. Many have cut their spending for items beyond housing, food, clothing and gasoline. A recession may already be underway because of harsh economic conditions. The fact is that 40% of Americans in the Bankrate study is very different from numbers originating from other sources. There is certainly a slowdown, but no one really knows how great it is.
Data about economic contraction can only be proved in hindsight. GDP numbers are at least a month old when they are issued. Unemployment numbers are several weeks old and subject to revisions. The same is true about PMI statistics and capital expenditures. Forecasts are often wrong. Evaluations of the past are much less so.
The Bankrate survey and dozens of others like it make claims of nearly perfect accuracy. In fact, they are no better than one toe slipped into one pond.
Douglas A. McIntyre