Foodservice Equipment Reports

Wealthier Households Lead Decline In Consumer Confidence

Last issue, we wrote about concerns from Technomic Inc. Consulting Economist Arjun Chakravarti that declines in equities and other asset-based wealth could lead to cutbacks in spending by more well-off Americans and have a negative impact on foodservice spending. The top quartile of households by income typically generates close to half the spending at restaurants.

Now, the monthly report on consumer confidence trends from the Thomson/Reuters University of Michigan Surveys of Consumers reports a strong dip in sentiment and durable-goods spending plans among those same wealthier households. The group’s Consumer Sentiment Index fell to 73.2 in June from 79.3 in May. The May reading was a four-year high.

Noting the sizable loss in confidence in June, the release announcing the numbers adds, “Perhaps of greater importance was that the entire June decline was among households with incomes above $75,000. High-income households were not only less optimistic about economic prospects but viewed their own financial prospects much less favorably.”

The research group noted a significant drop in spending plans for cars and household durables among the more well-off, while those of lower-income households remained unchanged. Lower-income households are benefitting from the significant drop in gasoline prices.

Surveys of Consumers Chief Economist Richard Curtin says the loss of confidence among higher-income households “was associated with a large drop in favorable ratings of economic policies and growing recognition that federal policies to bridge the fiscal cliff will not even be discussed until the very last minute. This meant that they wanted to adopt more cautious spending plans now to protect their finances from potentially adverse developments.” Overall confidence in economic policies remained near record lows, the research group says, with just 10% of all consumers judging current policies favorably.

Both the U.M. Expectations Index and Current Situation Index also recorded strong declines.

The decline in The Conference Board’s Consumer Confidence Index for June was more moderate, falling to 62 from 64.4 in May. The group’s confidence index has recorded four consecutive modest declines. 

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