Tuesday, September 20, 2005

Consumer Confidence and Katrina?

As another large hurricane grows in the Gulf of Mexico, threatening American oil production once again, perhaps it's a good a time as any to talk about how Katrina has affected the American economy - or more so, how some people think Katrina has affected it.

Last week there was talk that consumer sentiment is slumping because of Hurricane Katrina and now the Fed raises interest rates. But what does this talk about consumer sentiment really mean and is it even valid? Reading about why the Fed is raising rates, it's good to know there isn't much talk about "consume sentiment" which is good, cause I think it's bunk. I'll grant that the economy is in shock, just like many people are in shock. I'll even grant that less people have been shopping in the last few weeks - or rather, that they are spending less money on those trips. But, is the reason for these tighter purse strings necessarily worry over the economy?

Could it be that they are saving money to donate it to the relief work?

Could people have been home watching the 24/7 news coverage instead of shopping?

Could they be spending their time volunteering instead of shopping?

Or...I wonder if this economic analysis of the economy takes into account the fact that one of the major cities in the US is no longer spending any money. But ok, I'll assume they considered that.
The result was similar to trends in other consumer surveys as well as a string of major polls showing waning support for the Bush administration's economic policies.

"I think there's probably also a degree of loss of confidence in the government," said David Sloan, economist at 4CAST Ltd. in New York.

Loss of confidence in government? I don't know, I appreciate the Mr. Sloan is crediting the average American shopper with such complex thought processes. As Jim chronicled yesterday, some American shoppers are just tired of thinking about Katrina, so it's not stopping them from hanging out at the mall or anything.

For me personally, I know I've been spending less money in the stores, both because I am unemployed (which I was before Katrina) and because I wanted to be able to contribute to organizations like the Red Cross and the Salvation Army. I also look at a lot of things differently now. The way I treat water is different. I'm not so quick to dump out fresh water just because it sat on the counter for a while. It's true that I'm being more efficient about my driving since the gas prices went so high. But they've dropped over 50 cents in my area and I'm still being efficient...because really, I should have been all along right? So often in times of crisis we are awoken to things about our behavior that should have been changed long ago. Perhaps those of us whose actions are changing because of Katrina are only benefiting from better focus and awareness - not because we are so worried about the economy or because we trust the government any more or less than we did before - or more or less than we should have in the first place.

(Cross-posted at StonesCryOut)