Last week, the Federal Reserve Bank of Atlanta's research director Dave Altig wrote a macroblog post that emphasized the importance of consumer spending as the economy tries to rebound from a disappointing first quarter. Incoming data indicate that consumers haven't been willing to open up their wallets as much as expected considering recent economic conditions. The underlying fundamentals that influence consumer spending would suggest a higher level of consumption than the economy is currently experiencing. In a recent speech, Atlanta Fed President Dennis Lockhart pointed out these fundamentals, which included real personal income growth, household wealth, access to credit, and consumer confidence. According to the Middle Tennessee Consumer Outlook Index, released on May 1, Middle Tennessee has the confidence fundamental covered.
The Middle Tennessee Consumer Confidence survey is conducted by the Office of Consumer Research at Middle Tennessee State University, headed by Professor Timothy Graeff. Students in Graeff's marketing research course conduct the survey by phone. The 11-question survey asks questions related to economic conditions in the United States as well as Middle Tennessee.
The overall index rose to its highest level since June of 2004 (see the chart).
Participants felt particularly more optimistic about the local economy than the national economy. A solid 65 percent of survey participants indicated that business conditions in Middle Tennessee were good, but only 27 percent felt that conditions were good for the nation.
Looking forward, the future expectations index also rose since the last survey, suggesting that people are more optimistic about the economy over the near term. When asked what conditions for Middle Tennessee would be like in six months, 44 percent indicated things would be better, and 50 percent felt things would be about the same. The national numbers were less optimistic than the local but still represented an improvement over the last survey, with 26 percent indicating conditions would improve and 57 percent stating conditions would stay about the same.
The national consumer confidence indexes have trended up overall since the depths of the recession but still have not reached levels seen in the mid-2000s (see the chart).
Still, as Dave Altig pointed out in his macroblog post and President Lockhart in his speech, the fundamentals suggest that consumer spending will pick up in the not-too-distant future. Our confidence may be slightly guarded, but we are optimistic. Just like Middle Tennessee.
By Troy Balthrop, a senior Regional Economic Information Network analyst in the Atlanta Fed's Nashville Branch