Consumer confidence surveys show positive signs — what does that really mean?

This time of year, we hear a lot about spending.

How much people may be willing to spend at businesses is important for the local economy. Consumer confidence surveys are an attempt to measure this, and in Alaska right now, they’re showing positive signs. But there’s more to the story.

The Anchorage Economic Development Corporation put out its third quarter consumer optimism index this month. The organization is excited about the results.

“In particular, this one I feel very strongly shows a marked improvement in consumer optimism,” said Bill Popp, AEDC president and CEO

Popp said the consumer optimism index is the highest it’s been since 2014 in Anchorage.

The AEDC’s report is based on a survey conducted by Northern Economics. It looks at how residents feel about their own finances, the local economy and what they expect for the future. The company talked to at least 350 households in the Municipality of Anchorage, and asked them to answer a few questions on a scale of one to five:

  1. How would you rate current economic conditions in your community?
  2. How secure do you feel about your, and your family’s, financial situation? Is it getting better, worse, or staying the same?
  3. And, is the economy in your community getting better, worse, or staying the same?

If the index comes out about 50, that represents optimism in the community. This
quarter, that number was 59.3.

Popp said the positive trend has been building over the last couple surveys, and that’s a good sign.

“This is telling us that consumers are feeling like things are starting to loosen up,” Popp said. “That things are starting to turn around.”

How does consumer confidence fit into the greater economy? Why does anyone care? Popp said it’s a way to help determine if people are going to spend their money. Which, of course, impacts business.

“If consumers aren’t optimistic, or are feeling pessimistic, they spend less,” Popp said. “They won’t go to the movies. They won’t buy that new car, they won’t buy that new snow machine.”

The state’s Department of Commerce, Community and Economic Development said this renewed confidence in the economy is being felt around the state. Northern Economics gathers the data for the Alaska Confidence Index, too, and the survey questions are similar. The latest survey showed an increase in consumer confidence compared to the same time last year.

That survey looks at how Alaskan’s are feeling about the health of the local economy, personal financial situations, and expectations for the future. In the latest survey, all three were up from this time last year. The index shows increased confidence in the future of local economies and personal finances from the previous quarter.

But economist Mouhcine Guettabi cautions against making too much of these survey results.

Guettabi, who works for the University of Alaska’s Institute of Social and Economic Research, said the surveys can be informative when looked at alongside things like employment and wage data, revenue from small businesses and sales tax data.

“But taking it in a vacuum and extrapolating from it, I find is difficult,” Guettabi said.

Especially because Alaska doesn’t have a statewide sales tax. Guettabi said that makes figuring out whether more confidence means more spending pretty difficult.

Guettabi said these surveys are useful, but imperfect, and need to be interpreted with caution.