Economic Outlook Worsens; Most Now Say Economy's Getting Worse

ABC News
Economic Outlook Worsens
Most Now Say Economy's Getting Worse
Analysis by DALIA SUSSMAN

May 16, 2006— - Pessimism about the direction of the economy has grown to its highest level in seven months, apparently pushed by high gasoline prices and a weakening job market.

Fifty-six percent of Americans now believe the economy's getting worse, up nine points in the last month to its highest level since October. Just 14 percent believe it's improving, while about three out of 10 say it's holding steady.

Ratings of current economic conditions have similarly declined recently. The ABC News/Washington Post Consumer Comfort Index is now at -17 on its scale of +100 to -100, a new low for the year and down 10 points since mid-April.

Nevertheless, confidence is still stronger than it was last fall, when the index bottomed out at -23 after Hurricane Katrina. And its recent slide has moderated, with the index essentially flat this week compared with last.

Despite the impact on economic views, many Americans are adapting to higher gas prices, perhaps helping to keep consumer confidence from dipping even lower. Gas now averages $2.95 a gallon, but the number who say it's causing them financial hardship is 57 percent, down 13 points since last month, according to a separate ABC/Post poll out today. And more said they'd cut back on driving when prices spiked last fall than say so now.

EXPECTATIONS -- Americans have expressed more pessimism than optimism about the direction of the economy since January 2004, as well as on average in polls dating back to 1981. But the level of pessimism is unusually high this month, 18 points above the 25-year average. As noted, pessimism is up nine points from last month and 17 points from the start of the year, to its highest level since October 2005.

INDEX -- The weekly CCI, measured separately from expectations, is based on Americans' current ratings of the national economy, the buying climate and their personal finances. This week 33 percent rate the economy positively, down nine points since early April to its lowest since November 2005, and 33 percent call it a good time to buy things, unchanged from last week to again match its post-November low.

As is usually the case, many more, 58 percent, say their own finances are in good shape.

TREND -- As noted, at -17, the CCI is at its low for the year and is now eight points below its long-term average in polls since December 1985, -9. It's been as high as -7 this year, as recently as four weeks ago, but retreated as gas prices climbed.

Its all-time high was +38 in January 2000; its all-time low, -50 in February 1992.

GROUPS -- As usual, the CCI is higher in better-off groups. It's +31 among higher-income Americans while -67 among those with the lowest incomes, 0 among college graduates while -56 among those who haven't finished high school, -10 among whites but -57 among blacks and -11 among men while -23 among women.

Regionally, the index continues to be better in the West, at -9, compared with -24 in the Midwest and -18 in the Northeast and South. Confidence remains far higher among Republicans (+22) than independents (-24) or, particularly, Democrats (-41).

Republicans also are much less pessimistic about the direction of the economy. Thirty-four percent say it's getting worse, compared with 56 percent of independents and 77 percent of Democrats.

Here's a closer look at the three components of the ABC/Post CCI:

NATIONAL ECONOMY -- Thirty-three percent of Americans rate the economy as excellent or good; it was 35 percent last week. The highest was 80 percent on Jan. 16, 2000. The lowest was 7 percent in late 1991 and early 1992.

PERSONAL FINANCES -- Fifty-eight percent say their own finances are excellent or good, unchanged from last week. The highest percentage was 70 percent on Aug. 30, 1998, matched in January 2000. The lowest was 42 percent on March 14, 1993.

BUYING CLIMATE -- Thirty-three percent say it's an excellent or good time to buy things, also unchanged from last week. The highest percentage was 57 percent on Jan. 16, 2000. The lowest was 20 percent in fall 1990.

METHODOLOGY -- Interviews for the ABC News/Washington Post Consumer Comfort Index are reported in a four-week rolling average. This week's results are based on telephone interviews among a random national sample of 1,000 adults in the four weeks ending May 14, 2006. The results have a three-point error margin. The expectations question was asked of 500 respondents May 3-14; that result has a 4.5-point margin of error. Field work was done by ICR-International Communications Research of Media, Pa.

The index is derived by subtracting the negative response to each index question from the positive response to that question. The three resulting numbers are added and divided by three. The index can range from +100 (everyone positive on all three measures) to -100 (all negative on all three measures). The survey began in December 1985.

Click here for PDF version with charts and data table.