On CNBC and other stations I have watched lately, the news is typically that the economy in 2009 will begin to improve. This, after months prior to the election of harping on the horrible economic situation. Now, most Americans under 70 apparently think that 2008 was the worst year
they have ever seen economically.
Yet, whenever I talk to people, they always tell me that they, themselves are doing fine. I realize this is anecdotal but it left me wondering if at least a portion of the economic doom and gloom is caused by perception, not reality. For example, in a "Wealth survey" conducted by CNBC
on why people were spending less at the holidays--many of the reasons struck me as perception as opposed to current reality. Here are the findings:
Very few consumers cite lack of access to credit as a reason for why they plan to spend less this holiday season:
Will spend less due to inflation: 26%
Will spend less to save more: 20%
Will spend less due all the talk about the economy: 19%
Will spend less due to uncertainty about the future: 17%
Will spend less due to loss / risk of loss of jobs: 16%
Will spend less due to having trouble paying current bills: 15%
Will spend less due to lack of access to credit: 1%
Okay, the inflation argument doesn't hold up too well currently-- lots of prices have fallen, not risen, such as gas and home prices. The Consumer Price Index fell in November by 1.7%
so that would mean that deflation may be the problem, not inflation. Yes, prices were up in the summer but they seem to have come down and deflation is the issue for the moment. In addition, a full 19% of people are spending less due to talk about the economy, no doubt coming from the media and 17% are spending less due to uncertainty about the future, again driven most likely by the negative media talk prior to, and after the election.
Note that only 15% are spending less because they are having trouble paying bills and only 1% due to lack of credit so the credit crisis doesn't seem to have much to do with it--despite all the talk about it.
Has the media produced a self-fulfilling prophecy by going so negative? I think that partly, yes. I see news shows now trying to talk up the turnaround in 2009 (maybe because the election is over?) but they have scared people to the point that they don't want to spend, even if things are looking up. Will this change? Maybe, but sometimes, fear and panic can cause the very situation the government is now trying to prevent. I hope people figure this out.