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OC Consumers ‘Alive and Kicking’

Orange County consumers are bringing back that bullish feeling.

The Orange County Consumer Sentiment Index came in at 98.2 for the second quarter this year, a 4.6% increase from the 93.9 tally in the first quarter, according to a survey conducted by Chapman University and Claremont McKenna College.

It is the highest level for the index since mid-2018.

“The results of the recent quarter bode well for consumer spending in Orange County over the next six months or so,” Survey Director Marc Weidenmier said.

500 Responses

The Sentiment Survey is a random sample of 500 consumers reflecting the demographic makeup of OC. It’s a joint venture between Chapman’s A. Gary Anderson Center for Economic Research and Claremont McKenna’s Lowe Institute of Political Economy.

Weidenmier, a former research fellow at the National Bureau of Economic Research, built the index, which began in 2016’s third quarter with a composite 109.1.

It had steadily slipped since to a low of 93.9 in the first quarter this year.

The second-quarter turnaround suggests “consumer sentiment is alive and kicking in Orange County,” Weidenmier said.

“This trend is likely to continue in the upcoming quarters given that the federal funds futures market [was] predicting a cut to short-term interest rates later this year.”

The rate cut was made official earlier this month; the overnight lending rate dropped from 2.5% to 2.25%.

The survey asks seven questions measuring consumers’ outlook on their own economic prospects, spending plans and the broader economy. Respondents waxed more optimistic to five of the seven questions.

Sentiment rose for consumers about their own financial conditions over the next 12 months, climbing from 96 to 100.5.

They are also more optimistic about Orange County business conditions, which rose from 92 to 100.7.

The biggest jump was bullishness about their prospects of finding a job next year if they need one; that measure grew from 89.6 in the first quarter to 111.9 in the second quarter.

OC unemployment stood at 3% as of June and many executives have told the Business Journal about the difficulty of finding qualified employees.

A notable increase in optimism was felt by lower-income respondents making between $35,000 and $50,000 and for respondents making between $100,000 and $150,000. Part-time workers, students, and the unemployed also all had sizable increases in consumer sentiment.

“Income and employment trends reflect the tight labor market in Orange County, which opens up job opportunities to groups such as students and part-time workers and also raises the prospects for higher wages,” Weidenmier said.

No Car This Year

On the other hand, OC consumers are less inclined to buy a vehicle; that index fell from 104.4 to 86.5.

Weidenmier cites the rise in new-car prices as the culprit for stalled sales.

The consumer-based survey is a regional first in Southern California.

“Consumption spending makes up 70% of the U.S. [and O.C.] economy,” said Weidenmier.

The consumer survey here could affirm California and Orange County’s role as the economy’s canary in the coal mine—indicating a business upturn or conversely portending a recession, he said.

The consumer survey is another sign of confidence in Orange County’s economy.

About 79% of local executives said they see less than a 20% chance of a recession in the second half this year, according to a survey conducted last month by California State University-Fullerton.

CSUF’s Orange County Business Expectations Survey was at 87.1 for the third quarter, well above the 50 that signals an expectation of future growth.

People in Orange County are trending more positive than their northern neighbors in Los Angeles County where the overall index dropped from 88.6 to 87.1.

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