Orange County consumers are losing a little of that bullish feeling.
The good news: They’re still pretty bullish.
The third-quarter Chapman-CMC Orange County Consumer Sentiment Index, composed of seven questions measuring consumers’ outlook on their own economic prospects and spending plans, and their take on the broader economy, came in at 97.1, down 3.2% from 100.3 quarter-over-quarter.
The latest index is the lowest it has been in more than two years.
“We’re benchmarking to 2016,” said survey director Marc Weidenmier.
“The main point is that things are pretty good, solid, consistent. What it does suggest is people don’t believe the 4% is sustainable.”
The 4% he referred to is the 4.2% U.S. gross domestic product growth in the second quarter.
Third-quarter estimates are 3.5%, which puts the longest-ever U.S. economic expansion on pace for its best year ever.
But those are trailing indicators, as is Orange County’s 2.8% jobless rate. In Weidenmier’s survey, consumers gave lower responses to five of the seven prompts about the next 12 months, and were most concerned about rising interest rates and the slowing pace of home sales.
“Real estate is a very important component of economic activity in Orange County,” said Weidenmier, a professor of finance at Chapman University’s Argyros School of Business and Economics.
“Higher interest rates are making it more expensive for consumers to purchase homes and buy durable goods like cars and refrigerators. Consumers will start to postpone purchases of these items as interest rates continue to [go] back up.”
The biggest dips were expectations about Orange County business conditions and personal finances, both off about 7%.
Respondents remained confident in OC’s jobs machine, boosting their sentiments by 5% on finding a new and better job here if they found themselves looking for work.
Economic Studies
Weidenmier started conducting the survey in early 2016, a first of its type in Orange County.
It’s one of several notable economic surveys conducted by area universities. California State University-Fullerton’s Anil Puri has been conducting a quarterly gauge of executives and business owners since 2000, and Chapman’s other long-standing survey, conducted by Raymond Sfeir, is of purchasing managers.
Which survey tells business executives the most? “Consumption spending makes up 70% of the U.S. [and OC] economy,” said Weidenmier, a former research fellow at the National Bureau of Economic Research.
Noteworthy
• OC respondents are more optimistic than those in Los Angeles County, where the overall index dipped from 97 to 92. Weidenmier said the effect of new tariffs weighed heavier in ports-centric Los Angeles.
• Consumers again related kudos to the 2017 Tax Cuts and Jobs Act.
“No doubt, the tax cuts are helping these results, boosting optimism,” the professor said.
• Beyond measuring how 70% of the U.S. economy is feeling, Weidenmier said he thinks the survey could reaffirm California and Orange County’s position as bellwethers of the country’s economic future.
“California historically leads the U.S. business cycle … let’s see how much Orange County leads the business cycle … there’s many reasons to believe when the recession finally gets here, California will suffer first … depends how much housing is driving things.”
The Survey
The survey is a random sample of consumers reflecting the demographic makeup of OC, with 500 responses.
The sentiment index peaked at 109 in the third quarter of 2016. It’s a joint venture between Chapman University and the Lowe Institute of Political Economy at Claremont McKenna College.
