Consumer Confidence in Utah

By Dianne Meppen, Kem C. Gardner Institute

We live in a unique time. The uncertainty of the pandemic is a new experience for both consumers and businesses. It is a time of continual change: repeated openings and closings of businesses and schools, new COVID variants, supply issues, and “the great resignation.” The past two years may impact consumer behaviors and economic decisions for years to come.

Consumers’ economic decisions are generally determined by their confidence in the economy. When the economy is growing, consumer confidence generally increases along with spending. Conversely, when confidence in the economy diminishes, consumers feel less financial security and pull back on spending, resulting in a decline in sales for businesses. Surveys measuring consumer confidence have been particularly important in 2020 and 2021 due to COVID and its impact on the broad economy. In 2020, the Kem C. Gardner Policy Institute began conducting a Utah consumer confidence survey using five key questions from the University of Michigan’s eighty-year old Survey of Consumers. The questions focus on current family financial situation relative to one year ago, expected future change in family financial situation, business conditions expected during the following

year, business conditions expected over the next five years, and current buying conditions for large household goods. This monthly index, based on a survey of 400 Utahns, provides a measure of the general optimism or pessimism of the state’s consumers and can indicate the economy’s strength. The most important consideration when reading the index is to look at the trend over time. While it may be instinctive to compare month-to-month figures or look at a particular month compared to the same month from the previous year, these comparisons can be misleading. The current trend shows that consumer confidence has not reached its pre-pandemic level at either the national or state levels.

A number of factors influence the confidence of consumers, including unemployment, the stock market, inflation, and changes in housing prices. Imbalances in the economy can create inflation, which lowers confidence. Many Utah consumers are currently feeling the impact of rising prices, particularly at the gas pump and in housing. Interestingly, Utah’s low unemployment rate helps potential employees find work, but makes it difficult for employers to fill positions. Many employees have left low-paying jobs to find higherpaying positions. While the percent of homeownership in Utah is one of the highest in the country, approximately one-third do not own a home. Increasing home prices and rent costs have been difficult for many consumers with lower incomes. The ongoing pandemic has had a significant impact on consumer behavior for almost two years. “Utah consumers continue to feel the impact of the long arm of COVID,” said Natalie Gochnour, Director of the Gardner Institute. “Supply chain disruptions, inflation worries, and uncertainty about the virus continue to mute consumer confidence, even as the Utah economy leads the nation in job creation.” Even with these challenges, Utah residents consistently express more confidence in the state’s economy than in the US economy. In every month of comparable measures, Utah’s index exceeds the nation’s, which means Utah consumers are more confident than their national peers. In a recent survey, Utahns were asked to comment on whether they were better or worse off financially than a year ago. Their responses, listed below, illustrate some of the economic challenges facing Utah residents. • “I got another job, but inflation is bad, so our financial situation is about the same.” • “My income hasn’t changed, but prices have gone up.” • “The prices are rising. Inflation is rampant, and the only thing that has offset it is the value of our home.” When asked whether now is a good or bad time to buy major household items, Utahns responded with the following comments: • “It depends on your financial situation; some can afford it while others can’t.” • “It’s a bad time because supply isn’t there.”

2022 Outlook

As has always been the case, the economy will continue to have peaks and valleys, and consumer confidence will rise and fall. Inflation and COVID-19 will continue to loom large for consumer confidence during the coming year. Consumers are hopeful that the pandemic will soon wane, becoming less contagious with fewer serious symptoms. Moderating inflation should give a boost to consumer confidence in both Utah and the US.

Results of the monthly Utah Consumer Confidence Survey are available on the Kem C. Gardner Policy Institute website: www.gardner.utah.edu.