Consumers spend warily, look to Uncle Sam
Even as personal finances weaken, Americans look to activist federal policies as an aid to economic rebound.
Harvey Katz has his own personal index of consumer confidence: nuts and bolts.
Right now, sales are up at his Needham, Mass., hardware store - and that's not a good sign for the overall economy.
"When things are bad, people are buying necessities to take care of odd jobs," says Mr. Katz, referring to items like nuts and bolts. "People are staying home for vacation and are working on their houses."
It may not be the most scientific of surveys, but it hints at the challenge facing a wait-and-see economy.
Recent surveys, including a new Christian Science Monitor/TIPP poll, show a defiant desire not to let terrorists drive the economy downward. Americans express faith that the economy will recover - and that government policies will help.
But at the same time, the shopping public is a bit less sure of its ability to spend. That worries people like Katz.
Yet the fact that the picture is a nuanced one, with panic noticeably absent, is significant. Historically, a crisis such as the terrorist attacks can deepen and prolong the troubles of an-already weak economy.
"Americans recognize that their personal financial situation six months from now may not be as rosy, but are looking to the government [for economic stimulus]," says pollster Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Intelligence Inc.
In the new Monitor/TIPP poll, an index of Americans' personal financial outlook for the next six months fell from 60.4 in September to 57.2 in October.
At the same time, the poll's broader "Economic Optimism Index" rose: from 52.1 in September to 57.6 in October.
The jump stemmed from a surge in one of the index's three components: confidence in federal economic policies. The other two components balanced one another, as Americans' personal financial outlook fell and their outlook for the economy rose.
In the federal arena, Americans saw lawmakers racing to fund rebuilding efforts, rescue hard-hit airlines, and consider further tax cuts and spending to stimulate the economy. Also, the Federal Reserve delivered a full percentage point of interest-rate cuts following the attacks.
"First and foremost, Americans see that the leadership in Washington is totally committed to keep the economy healthy," says Mr. Mayur, who conducted the poll of 925 Americans Oct. 3-7. The surge in support, he says, came from Democrats and independents, who apparently joined Republicans to rally around their chief executive in a time of trouble.
The new poll represents the first reading of consumer confidence this month - and the first conducted entirely after Sept. 11.
In addition to government policies, declines in oil prices, utility bills, and mortgage rates could play a role in minimizing the shock of that tragic day.
But the road ahead remains uncertain. The nation's modern, consumer-driven economy has never experienced an attack of this magnitude. Further terrorist incidents or layoffs could add to weakening already seen this year in consumer-confidence pollsdone by the Conference Board.
"Consumer spending sticks pretty closely to consumer confidence, especially if you look at big-ticket items like ... automobiles," says Michael Lehmann, an economic historian at the University of San Francisco.
The long-term effect of a shock to the national psyche, experts say, hinges largely on the health of the economy at the time of the incident. If the economy is in decline, as was the case this September, a drop in confidence could make the slump much worse. After Iraq's invasion of Kuwait in 1990, an immediate drop in consumer confidence prolonged what might have been only a slight dip.
In the present situation, consumers showed an initial fortitude, amid calls for home-front patriotism led by the pocketbook.
"We often have seen consumers come together in times like these, and so it's not so surprising or unexpected," says Richard Curtin, director of the University of Michigan's survey of consumer sentiment.
Jeff Stevenson admits that he has joined those rallying behind the effort to consume. "If anything, I've been more determined not to let the terrorism change my lifestyle," says Mr. Stevenson, who owns a security/surveillance company in Hollywood, Calif.
Still, most economists agree that Americans will delay many big-ticket purchases for now.
At Chuck Janning's Maytag Home Appliance Center in Cincinnati, customers have repairs on their mind, just as they do at Katz's hardware store.
Mr. Janning normally sells appliances for families looking to upgrade or remodel their kitchens. But last month, the store's few sales were prompted by domestic necessity. "Most remodeling projects have been put on hold," he says.
Even as Americans spend less, particularly on travel and tourism, few analysts predict anything like the all-out meltdown in consumption that took hold during the 1930s.
Retail anthropologist Paco Underhill is quick to remind clients that consumerism plays a more central role in the US economy now, and that many citizens will seek solace in a shopping mall, as well as a chapel, in hard times.
"Let's remember that since we were hunters and gatherers we've been going to the marketplace," says Underhill. "It's the place we feel comfort by being around other people."