On the eve of the holiday season, the CNBC/Portfolio.com Wealth in American Survey finds Americans painting a deeply grim picture of the current state of the economy with bleak implications for holiday spending. But Americans are expressing optimism about the future that seems tied to the election of Barack Obama.
The current pessimism runs so deep that, for the first time in the survey's two-year history, no statistically significant group (not even 1 percent) of the more than 800 survey respondents rated the economy as excellent. In fact, the percentage of Americans who rate the economy as poor ratcheted up to 70 percent from 65 percent last quarter and 33 percent a year ago (see chart below).
The pessimism looks set to have real economic consequences: Americans plans to spend on average just $704 on their holiday shopping, down 4.6 percent compared with a year ago. One in 10 Americans plan to spend nothing on holiday shopping, double the one in 20 from a year ago.
- Holi-dazed: Portfolio.com looks at holiday consumer spending
- Share your opinion: Answer some of the survey questions
And yet, there was unexpected optimism in the survey. The percentage of Americans who believe the economy will improve next year surged 11 percentage points from September and stands at 39 percent (see chart below). In fact, the level of optimism is higher than at any time in the past 10 months, and appears connected with a change in administrations.
Democrats are twice as optimistic about the economy as they were in September; Republicans are nearly twice as pessimistic. But independents are more upbeat, with 35 percent now saying the economy will improve in 12 months, compared with 25 percent in September. Asked how the election of Barack Obama would influence the economy, 55 percent of respondents said they expect it to get better and only 13 percent see it worsening. The answer breaks sharply along party lines, with 78 percent of Democrats and 24 percent of Republicans believing Obama's election will improve the economy. Independents were split down the middle.
Regardless of what Americans believe about the future of the economy, they are not optimistic about a series of key economic variables. Americans think their wages will grow by only 3.1 percent next year, down from 5.3 percent a year ago; they believe their home prices will decline by 1.6 percent, the most in the life of the survey, and considerably below the 0.3 percent decline envisioned in September. A year ago, Americans thought their home prices would rise by 2.2 percent over the coming 12 months (see charts below).
One positive outlook for the future is that Americans see prices rising by 5.8 percent, the smallest increase since the survey began asking the question in March 2007. The percentage is almost half the expected increase registered in June when oil and food prices were surging. Also on the plus side, while Americans rate the national economy poorly, they have a better view of their personal situation. More than half of Americans (52 percent) rate their personal financial situation as good or excellent, compared to just 4 percent when asked about the overall economy. (Tell us how you feel about your personal finances. Take our poll.)
Other findings of the survey:
Americans plan to spend less on shopping this holiday season, with 30 percent saying the higher cost of necessities is the No. 1 reason for cutting back. Sixteen percent said it was because they or a family member are unemployed, and 15 percent said it was because they are having trouble paying regular bills.
- Investing: 52 percent of respondents said it is a somewhat bad or very bad time to invest in the stock market, up from 27 percent in October, 2007;
- Safe Banking: 35 percent of those surveyed said they are not confident or only somewhat confident their money is safe in a federally insured bank account; and
- Purchasing a Car: 37 percent surveyed said they would be willing to buy a car from a bankrupt auto maker, while 52 percent said they would not, and 11 percent were unsure.