Consumer confidence will continue to decline in the next year as labor markets proceed to weaken and unemployment rises but consumers are not as pessimistic as they have been during past recessions, a University economist said yesterday.
Richard Curtin, director of the University”s Index of Consumer Sentiment, was speaking at the Michigan Theater as part of the University”s 49th Annual Conference on the Economic Outlook. During his presentation, Curtin reflected on the economic fallout of the Sept. 11 attacks and spoke on the consumer outlook for 2002.
“Never have we seen an event have as much impact as this has,” Curtin said. “But, the most striking result is how little impact the attacks had on already declining confidence.”
Curtin noted that while overall consumer sentiment and expectation are at their lowest levels since the nation”s last recession during the early 1990s, people are not as pessimistic. “Consumers do expect some gains in the next year they see this as short-term,” Curtin said.
The main difference between the current weakened economy and the one which occurred a decade ago is inflation.
“We have very low inflation now,” Curtin said. “This is an important positive this is what”s keeping personal finances bright.”
He predicted the unemployment rate would top out at around 6.5 percent in 2002, while the travel and airline industries will continue to report losses.
Curtin also had negative predictions for the housing industry.
“People feel home prices have declined and it”s not a good time to sell,” he said. “People are more likely to refinance their mortgages than buy. We”ll have a lower housing market in 2002.”
On a positive note, Curtin acknowledged the current vigor of the auto industry, which has seen sales surge as a result of lowered annual percentage rates. Jim Weasel, sales manager at Howard Cooper Import Center on South State Street, agreed.
“The APR, the rate that the manufacturers are advertising, is driving up traffic in the store,” Weasel said. “Business is up a good 20 percent, I would say.”
“We”re releasing three new (Honda) models next year and we expect a business increase of 15 to 20 percent,” he added, noting that in recent months, the APR of a Honda Accord has fallen from 7 percent to 2.8 percent.
With auto prices lower, many students are thinking of purchasing a new vehicle. “I”ll admit I”m looking,” said LSA junior Colleen Cusick. “I really want something with four-wheel drive for the winter and the rates are so good right now, I”d be stupid not to at least browse.”
But Curtin cautioned that time is still needed for a full economic recovery.
“Data indicates that we are in and will record a recession,” he said.