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Decline in consumer confidence not necessarily sign of trouble, says marketing professor

October 14, 2003

A decline in consumer confidence isn't necessarily a harbinger of bad economic times, says Dr. Carmen Reagan, professor of marketing at Austin Peay.

Recent reports from The Confidence Board and Middle Tennessee State University indicate a national and regional decline in consumer confidence.

According to the report, such attitudes may impact consumers shopping behavior during the upcoming holiday season.
October 14, 2003

A decline in consumer confidence isn't necessarily a harbinger of bad economic times, says Dr. Carmen Reagan, professor of marketing at Austin Peay.

Recent reports from The Confidence Board and Middle Tennessee State University indicate a national and regional decline in consumer confidence.

According to the report, such attitudes may impact consumers' shopping behavior during the upcoming holiday season.

“Consumers might not significantly increase their spending in the near future and actually might curtail their spending heading into the upcoming holiday shopping season,” the report said.

With 26 percent of Clarksville businesses classified as retail, such a prediction could be cause for alarm.

But Reagan sees no reason to panic. “Consumer confidence is a lagging indicator," she explains. "It takes a while for consumers to change their behavior. In the meantime, consumer confidence may increase."

Also, for the first time since January, the U.S. Department of Labor has reported an increase of 57,000 jobs, Reagan says. “The stock market responded quickly. That should lead to an increase in consumer confidence.”

Reagan says there's another reason the consumer confidence indicator may not be a strong predictor of things to come: the nature of consumers.

“We respond emotionally to events," she explains. "Consumer confidence reflects such responses, but our behaviors may not." In other words, though we may say we lack confidence in the economy, we're still likely to get everything our kids everything on their wish list.

Even if the shopping behavior of Clarksvillians were to be affected by declining consumer confidence, not every retailer would suffer. Declining consumer confidence does not lead to less spending, but to the purchase of different items, Reagan says.

“If you're worried about your job, you're less likely to spend in a way that results in long-term debtbuying a car, for example. People also may buy fewer or less expensive items for [holiday] gifts. Obviously, they'll be more concerned about getting value for their money.”
Terry Stringer