# For Release Wednesday, January 16 # CONSUMER ATTITUDES AND INCLINATIONS TO BUY November-J)ecember 1956

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1 # For Release Wednesday, January 16 # Survey Research Center University of Michigan January 16, 1957 CONSUMER ATTITUDES AND INCLINATIONS TO BUY November-J)ecember 1956 Highlights A nationwide survey of consumers, conducted by the Survey Research Center of the University of Michigan between mid-november and mid-december, shows the American consumer, as of the end of 1956, satisfied with his financial situation and confident regarding the future. A slight deterioration in consumer sentiment which began in late.1955 has now been halted, and some signs of improvement are evident. Yet consumer attitudes and buying plans are not as buoyant as in late 195U and in 1955* At that time optimism was growing rapidly. Since then people's expectations about their own welfare and national business conditions have been stable at a high level of satisfaction. The stimulus of growth in optimism has been lacking. The primary change which has occurred in the past few months in people's attitudes toward their personal financial situation may be described as a further "levelling off." The proportion of families who said that their financial situation was the same as a year earlier and who expected no change was somewhat higher in Nov.-Dec than i t had been earlier in 1956 or in let people's satisfaction with their financial welfare is maintained close to peak levels, and favorable expectations about personal finances continue to far outweigh pessimistic expectations.

2 -2- Confidence that good times lie ahead for the nation's economy during the next year, as well as during the next several years, is as widespread as at any time during the postwar period. But once again, no significant improvement has occurred during the past few months. The crisis in the Near East, which was prominent in the news during the interviewing period, caused only a very slight increase in uncertainty. The results of the presidential election were most commonly viewed as having no effect on business conditions. Among upper- and middle-income people who did feel that the reelection of President Eisenhower will effect the economic picture, i t was almost unanimously agreed that the effect will be favorable. Another major reason for the lack of buoyancy in inclinations to spend lies in the price situation. The feeling that "good buys" are available is much less common than two years ago. The belief that prices have risen and will rise in the future began t o spread i n the spring of 1955 and was s t i l l growing i n summer An important finding of the Nov.-Dec survey is that since August 1956, no further increase has occurred in the proportion of consumers who see an upward trend in the price level. Signs that consumer inclinations to buy are improving may be found primarily in expressed buying intentions. Plans to buy new cars are substantially more frequent than they have been e a r l i e r i n 1956, before the i n t r o d u c t i o n of the new models. However, they remain below the very high level attained in the fall of 195U. Intentions to buy used cars are at a peak for the 195U-56 period. Intentions t o buy homes have increased i n frequency i n re-

3 -3- cent months* They now compare favorably with house buying plans expressed at other times during the past two years. However, there are indications that some people who expressed house buying plans this November and December may have been unaware of the present credit stringency and may be forced to postpone their plans. Plans to make home improvements or repairs are unchanged from August, as well as from a year ago. Plans to buy major household goods give little or no indication of recovery from their earlier decline «The Survey The Survey Research Center's latest economic survey was conducted between November 7 (immediately following the election) and December 15- A nationwide cross-section of about 1375 adults was interviewed. I t was selected according t o principles of probability sampling, which insure that people from all walks of life are represented i n accurate proportion i n the sample. Each respondent was asked a number of specific questions, for example, about the family's income, recent purchases, and buying plans. In addition people were questioned regarding their satisfactions, opinions, and expectations. The attitudinal questions were phrased so as to allow respondents to explain their views fully and in their own words. Because of the limited size of the sample, minor differences between current and past findings may not be significant. The "sampling error", which arises because only a fraction of the population is interviewed, must be kept in mind particularly at a time like the present, when many changes which have occurred are small. If comparable data in the accompanying tables differ by

4 4imore than 1± percentage points, there are 95 chances in 100 that these differences do not represent mere chance variations in the sample. The sampling error is smaller than k percent for proportions close to 10 or 90 percent. It is larger than li percent for findings that relate to subgroups of the population. The primary objective of the Nov*-Dec survey was to measure consumer inclinations to buy. Positive inclinations to buy depend on favorable attitudes and expectations as well as on the existence of "felt needs" among consumers. The current state of inclinations to buy therefore i s best gauged by answers to a t t i tudinal questions jointly with expressed buying intentions. Needless to say, inclinations to buy will result in purchases only i f adequate financial resources are available to consumers. Consumers 1 financial resources are measured in January and February of each year in the Survey of Consumer Finances, which the Center conducts jointly with the Federal Reserve Board. Inclinations to buy maychange rapidly, and must therefore be measured at more frequent intervals. The Nov.-Dec survey was one of a series of periodic surveys conducted for this purpose. These surveys are privately financed and are independent of the Surveys of Consumer Finances. Answers to identical attitudinal questions asked of representative samples of the population every few months yield trend data which are indicative of changes in the direction of consumer sentiment. They permit us to make comparisons between current inclinations to buy and those which existed in earlier periods of active or slack demand. Such comparisons may help us to assess the prospects for consumer markets; they do not provide us with exact quantitative forecasts.

5 -5- Index of C onsumer The use of consumer survey data in evaluating the con- Attitudes sumer outlook is facilitated by an overall indicator of incli nations to buy which combines the answers to a number of questions. Such an Index of Consumer Attitudes and Buying Intentions has been constructed by the Survey Research Center from its data and has been published since 1951u The Index is presented i n the accompanying Chart. The Index is still in an experimental phase. The Center plans to make revisions and to include additional questions, in the near future. At present the Index includes six series which measure consumer attitudes and expectations and two which measure buying intentions (for houses and cars). For the time being all components of the Index carry equal weights, although some attitudes may be more decisive than others. The Chart reveals a pronounced upturn in the Index of Consumer Attitudes and Buying Intentions between August 1956 and Nov.-Dec The upturn is large enough to raise the Index once again to its 1955 peak. To appraise the significance of this we must know what components of the Index are responsible for rise this improvement. A second line on the Chart shows that consumer a t t i tudes excluding buying intentions levelled off between August and the end of the year. These attitudes continue to register a high degree of optimism, but not quite as high as in early 1955 It is the buying intentions in the overall Index which are responsible for i t s recent gains. The upturn i n buying intentions was p a r t i cularly pronounced (l) for houses (where there is, however, some doubt how soon consumers will be able to translate their plans into purchases) and (2) for used cars. Buying intentions for new cars

6 CONSUMER ATTITUDES AND BUYING INTENTIONS cd X Ar Intentions to buy new cars \ / / \ \ I 10 Index of consumer 110 attitudes and buying intentions / \ \ J Index of consumer attitudes, excluding 95 buying intentions 95 / The Index of Consumer Attitudes and Buying Intentions is an average of eight attitudes: recent change in own financial situation, expected change in own financial situation, one-year business outlook, five-year business outlook, evaluations of buying conditions for household goods, price expectations, plans to buy home, plans to buy automobile. For each series the formula "percentage of favorable responses minus percentage of unfavorable responses plus 100%" was used. Nov. -Dec The Index of Consumer Attitudes, Excluding Buying Intentions, differs only in that It excludes plana to buy home and plans to buy automobile. Index of Intentions to Buy New Cars Percentage of Families who "will," "probably will" or "may" buy a new car during next year. From Periodic Surveys. August

7 -6- are shown separately on the Chart. They have increased appreciably in frequency during the past few months, but are s t i l l well below the October 1 5U high. The Index of Consumer Attitudes and Buying Intentions can also be computed separately for major income groups* We find that inclinations to buy have deteriorated somewhat among the lowest income groups (income under &3000), while the middle and upper income brackets show some improvement, primarily in buying intentions. The group with incomes under $3000 has been decreasing in size over the past year, while the group with incomes of $5000 and over has been growing. This latter group now includes over UO percent of all families and accounts for an even larger proportion of total purchasing power. # * # The Index of Consumer Attitudes and Buying Intentions provides a summary view of the trend in inclinations to buy* For a fuller understanding of recent changes in attitudes, we must examine some of the specific attitudes measured and the reasons which underlie them. Personal Financial Reports of stability predominated when consumers described S i t u a t i o n t h e i r personal f i n a n c i a l s i t u a t i o n i n Nov.-Dec. 1956* F u l l y h a l f - more than at any time in the past five years now say that their financial position is the "same" as a year earlier (Table 1). Among the remaining families almost twice as many regard themselves as "better- off" as regard themselves asr»worsenoff:^l'--(a- slight (and statistically Ins igrnficant) ^ ris e -in.' the-. frequency of. reported i in~ eome increases is once again evident.

8 -7- Only the lowest income group shows a deterioration in the feeling of economic well-being, with not more than 11 percent reporting financial improvement - a low for the past four years. Since this group has been steadily shrinking, i t is coming in creasingly to consist of families who are experiencing financial reverses and of older people with fixed incomes who are particularly susceptible to inflationary pressures. The pervasiveness of consumer satisfaction in all but the lowest income groups was further evidenced by answers to the question - "Do you think people around here have any worries about how they'll get along in the next year or so? I am speaking of people like yourself and your friends." About 60 percent of people with incomes over $3000 stated flatly that people like themselves have no financial worries these days. Some others mentioned matters which are not economic in origin such as illness or international events. Among the 30 percent who did refer to economic worries the problem of making ends meet was by far of greatest concern* About 16 percent spoke of high expenses or unsatisfactory incomes. Five percent mentioned inflation; another 5 percent mentioned bills and debts. Only 7 percent expressed concern about job security or employment opportunities. A mere 2 percent referred spontaneously to a lack of adequate savings. (Some people mentioned more than one worry ) Consumer expectations concerning their financial prospects are also fairly stable at a high level. For the population as a whole, during the last few months of 1956 a small increase has occurred in the number who foresee no change in their situation during the coming year (Table 2). About one-third of families

9 -8- anticipate improvement in the year ahead. The percentage "who are pessimistic about their prospects has remained substantially constant over the past two years, at a low six percent. Apparantly many consumers have come to regard periodic improvements in their financial situation as the normal course of events, while financial reverses tend to be regarded as temporary or abnormal. When asked - "Thinking of your income and expenses during the next year - would you say that i t will be an average year for you, or better than average, or worse? 1 ' only 27 percent of those who expected to be better off, felt that 1957 would be a "better than average" year for them. On the other hand, a majority of those who expected to be worse off spoke of 1957 as a "worse than average" year for them. Such perceptions reflect the high level of confidence and are particularly_ conducive to consumer spending People's Ec onomic Outlook The opinion that business conditions have stabilized is coming to be more and more widely held by consumers. To be sure, over one-fourth see some improvement in recent business trends, but more than half of consumers regard current business conditions as comparable to conditions prevailing a year earlier. Only 13 percent argue that business conditions have grown worse over the past year; this compares favorably with the 22 percent who held this opinion in August 1956 (Table 3). Moreover, when people were asked whether they had heard of any changes in business conditions during the last few months mentions of unfavorable changes were less frequent than i n summer P a r t i c u l a r l y pronounced was the decline i n r e ferences to layoffs, production declines, and.labor unrest.

10 -9- Expectations concerning future business activity have remained highly optimistic. Three-fourths of the American people expect "good times" in the year ahead. Some rise in expressions of uncertainty from 11 to 15 percent - has however occurred (Table U), The conclusion that consumers are confident of stability at a high level, rather than anticipating further business improvement, is supported by the continuing shift from expectations of improvement in business conditions "a year from now" to the expectation that conditions will remain the same. This trend began in June 1955 and has not been interrupted since (Table 5). Long-run business expectations are, i f anything, more optimistic than they were in August, At that time 23 percent of consumers foresaw some period of recession or depression during the next five years; this percentage has now fallen to 17, At the same time, there has occurred a small rise in the percentage of people who expressed uncertainty regarding long-term business trends. The growth in uncertainty reflects a concern over international tensions. Whereas in August one-tenth of the population spontaneously mentioned international tensions in evaluating the country's five-year economic prospects, this proportion has now climbed to one fifth. And in the course of the interview consumers frequently answered other questions regarding the business outlook in terms of the cold war. The threat of war is for some a harbinger of good tines, signifying an increase in production and employment. For others i t means high prices and shortages. Moreover, people are often reluctant to ascribe desirable economic consequences to international tensions. In the current survey, as well as in other recent surveys,

11 -10- people were asked - "Do you happen to know about any unfavorable developments which may make the country's business situation worse?" Nineteen percent of people - more than twice as many as earlier in the year - mentioned the threat of war as an unfavorable development. But 7 percent of people explicitly mentioned i t when a similar question was asked regarding favorable developments. Economic factors were less frequently suggested as unfavorable developments than at other times in the past year. Prices and Market An important finding of the Nov.-Dec» 1956 survey is that Conditions the spread of inflation-sensitivity has been halted after a substantial increase earlier in Nevertheless, there is now a sizable group of people who argue that the present is a "bad time to buy" cars and houses because prices are "so high." If this opinion should become more widely held in the months ahead, i t might become a deterrent to consumer spending. When questioned about recent price movements, consumers made similar reports in Nov.-Dec as they had in August. Once again a third of the population felt that prices had risen during 1956, but significantly fewer than in August felt that they had gone down (Table 6). However, among upper income people the perception that the past year was one of rising prices became more widespread. The growth of inflationary expectations has also levelled off. Although consumers s t i l l anticipate further price rises, the opinion that the next twelve months will bring new increases is no more widespread now than i t was in August, while the view that prices will remain the same occurs more frequently (Table 7). Very

12 few people foresee a price decline, this proportion having dropped from nine percent in August to only five percent now. The trend away from expectations of a price decline has continued -11- uninterruptedly since October 195u, A similar picture exists with respect to the long range price outlook. The opinion that prices will increase during the course of the next f i v e years remains near the peak l e v e l of 35 percent attained in August. Upper-income people are in the vanguard of those having long-run inflationary expectations. A substantial proportion of consumers feels uncertain about long-range price trends. Many of those now regard price developments as contingent upon the international situation. The opinion that prices will drop in a few years has grown less and less common over a period of years. Between August 1956 and the end of the year a further small decline occurred in the frequency of expectations of a longer-run price decline. Between August 1956 and the- end of the year, no change occurred in answers to the question - "Do you think this is a good time or a bad time to buy large household goods?" (Table 8). Evaluations of buying conditions for cars also remained unchanged. During the past year the spread of the opinion that prices are rising' did not lead to a deterioration of judgments of buying conditions. However, Table 9 suggests that there remains a substantial minority of consumers who express unfavorable attitudes toward buying conditions, especially for cars and houses. Their most typical complaint is that prices have risen or are "too high." These people have buying plans less frequently than families who feel that its a good, or at least a fair, time to buy. In fact, the recent increase

13 -12- in autcanobile buying plans is limited to families who do not judge buying conditions adversely* If there is any lack of zest in consumer spending, the price s i t u a t i o n seems to be at least p a r t l y r e sponsible Buying Intentions Evidence of improvement in inclinations to buy may be found primarily in expressed buying intentions. Plans to buy automobiles in the next year or so have taken a pronounced upturn during the past few months. The used car market seems to be particularly attractive. Plans to buy used cars are more frequent than at any other time in recent years. Intentions to buy new cars, although s t i l l well below the level registered in October 195U, are now more frequent than in the spring and summer of 1956 (see Chart). Optimism regarding the new car market may also be derived from the finding that a substantial proportion of consumers feel that the 1957 models differ "quite a lot" from the 1956 cars. This proportion is much greater now than the proportion who expected the 1957 models to differ when questioned earlier in 1956, prior to the appearance of the new models. Plans to buy houses also have turned up in recent months. They are as high now as in 195U and 1955* The proportion of families who would like to move, but have no immediate moving or home buying plans, is as large as at any time during the past two or three years. These findings point to great underlying strength in the housing market. In the coming year, lack of credit may, however, prevent the fulfillment of some home buying intentions. There is evidence that many people are not aware of the difficulties they may encounter in obtaining mortgage credit. When asked for

14 reasons why i t might be a good time or a bad time to buy a house, only 7 percent of all people referred to tight credit, far fewer than complained about high prices. Plans to make home improvements and repairs are at the same high level as in the fall of 1955 and 195k. For the population as a whole, plans to buy major household appliances - refrigerators, washing machines, cooking ranges, and television sets - have not increased in frequency during the past few months. They remain lower than in 1955 However, in the large group of families with incomes over $5000 some s l i g h t improvement over earlier 1956 figures has occurred.

15 Survey Research Center Economic Behavior Program Table 1 Consumers'' Evaluations of Their Financial Situation f r., as.. Compared with a Year - Aarlier -,. Evaluation of Financial Situation W o v- Dec Sept-Oct,. June U Oct June 1955 Oct May 1956 Aug Nov. Dec A. All Families Better off 28 26% 30% 30* 3k% $ 33% 32* Same 50 kl k3 U2 U5 lil hk hk 50 Worse off 20 2k Uncertain Not ascertained a- 1 -H- # # Total Too? Io5? 100^ loo? loo? ioojd loo? loo? loo? Number of cases** U B. Families with Incomes of &5000 and Over Better off UQ% 35* k0% m ks% k9% k3% U3% k3% Same h6 k3 kz k2 U3 U6 Worse off Hi Uncertain Not ascertained -it Total I3o? 100? loo? I5o? 100? Too? Too? 100? 155% Number of cases*-* * U * Less than one-half of one percent. -ft* All remaining tables have same number of cases unless otherwise indicated. The question was: "We are interested in how people are getting along financially these days. Would you say that you and your family are better off or worse off financially than you were a year agp? How is that?"

16 Survey Research Center Economic Behavior Program Table 2 Consumers' Expectations Regarding Their Financial Situation a Year Hence Expected Change in Financial Situation Sept- Oct. ' June * Oct, 195U June 1955 Oct May 1956 Aug Nov.-' Dec A. All Families Better off 31* 31* 31* 37* 36* 36* 35* 32* Same 1*0 1*7 h3 1*1 1*1* U5 1*5 1*8 Worse off Uncertain U 15 11* * Not ascertained 1 l l H- Total Iro? ICS? loo? 100? loo? loo? looi 10O? Number of cases U B. Families with Incomes of ^5000 and Over Better off 1*0* 37* 1*3* 1*6* 1*2* 1*3* 1*3* h2% Same 36 hh *3 1*2 a hh Worse off h 5 Uncertain l l * u 9 Not ascertained # -it # * # i s- Total 100? 100* loo? I5o? loo? 100* Too? 100? Number of cases 310 1* * * Less than one-half of one percent The question was: "Now looking ahead - do you think that a year from now you people will be better off financially, or worse off, or just about the same as now'?"

17 Survey Research Center Economic Behavior Program Table 3 Evaluation of Business Conditions as Compared with a Year Earlier Nov.- Business Conditions Compared June Oct# June Oct. May Aug. Dec. to a Year Ago 19$k 195h A. All Families Better now 17* 20* 1*7* 1*8* 33* 29* 28* About the same, uncertain *6 1*6 51* Worse now 1*9 la Not ascertained * Total 100* 100* 100* 100* 100* 100* 100* Number of cases * B. Families with Incomes of $5000 and Over Better now 20* 26* 56* 58* 38* 32* 35* About the same; uncertain la 1*6 51- Worse now 51 1*0 ll* Not ascertained Total 100* 100* 100* 100* 100* 100* 100* Number of cases 1* The question was: "Would you say that at present business conditions are better worse than they were a year ago?"

18 Survey Research Center Economic Behavior Program Table k Business Conditions Expected During the Next Twelve Months Nov- Expected Business Nov-Dec, Sept-Oct. June Oct- June Oct. May Aug. Dec. Conditions U 19$h A. All Families Good times 56* kl% 50* 51i* 72* 71* lk% 75* lk% Good in some ways, bad in others Bad times Uncertain 2k Not ascertained l Total 100* 100* 100* 100* 100* 100* 100* 100* 100* B. Families with Incomes i of $5000 and Over Good times 70* 55* 63* 66* 82* 82* 83* 85* 8U* Good in some ways, bad in others k 5 Bad times k U k 2 Uncertain Not ascertained # 1 Total 100* 100* 100* 100* 100* 100* 100* 100* 100* #Less than half of one percent. The question was: "Thinking about conditions in the country as a whole - do you think that during the next twelve months we'll have good times financially or bad times, or what?"

19 Survey Research Center Economic Behavior Program Table 5 Expected Business Conditions a Year From Mow as Compared with the Present June Oct. June Oct. Apr* Aug. Nov.Dec. Expected Business Conditions 1951* 195U A. All Families Better 19* 20* 22* 18* 19* 18* 16* About the same 6U Worse * Not ascertained, don't know Total 155? 166* loo? loo? 1(X5? 100? 1O0? Number of cases *0. 131* B. Families with Incomes of $5000 and Over Better 23* 21* 27* 21* 21-* 20* 20* About the same Worse * 1* Not ascertained, don't know * Total 100? loo? 155? 155? 155?. 155? loo? Number of cases 511* The question was: "And how about a year from now, would you expect that in the country as a whole business conditions will be better or worse than they are at present, or just about the same?"

20 Table 6 Opinions about Recent Price Trends All Families Opinion Prices went up Prices stayed the same Prices went down Uncertain June Nov, June Nov-Dec, Aug. Nov-Dec, * 63* 27* 23* 36* 38* U5 U Not ascertained Total 100* 100* 100* 100* 100$ 100* The question was: "We'd like to know r/hat's happened to prices on household items and clothing here in (city),., since the first of the year. Have they stayed about the same, gone up, or gone down?"

21 Survey Research Center Economic Behavior Program Table 7 Price Trends for Household Goods and Clothing Expected Over Next Year Sept- Oct June 1951* Oct. 195U June 1955 Oct May 1956 Aug Nov.- Dec, 1956 A. All Families Will rise 6$ No change expected; or some rise, some fall 1*3 Will fall 26 Uncertain, depends 21* Not ascertained 1 Total * 12* l l * * 27* 35* 1*0* kk% 1*6 1*6 1*9 1*6 la 1* * l l * * l 1 # 1 100* 100* 100* 100* 100* 100* 100* 100* Will rise B. Families with Incomes of $5000 and over 13* 10* 10* 30* 37* la* 50* 51* No change expected; or some rise, some fall 1*9 1*8 53 1*8 kh 1*1* Will fall * Uncertain, depends Not ascertained Total # # # 1 100* 100* 100* 100* 100* 100* * # Less than half of one percent. The question was: "What do you expect prices of household items and clothing will do during the next year or so - stay where they are, go up, or go down?"

22 Survey Research Center Economic Behavior Program Table 8 Opinions of Buying Conditions for Large Household Goods Opinion Nov. Sept. June Oct. June Oct. Aug Nov-Dec, A. All Families Good, or very good, time to buy 26* 36* 43* 45* 55* 55* 54* 51* Good time in some ways, but not in others, or i t depends lit 13 l l Bad, or very bad, time to buy Don't know Not ascertained Total 100* 100* 100* 100* 100* 100* 100$ 100* B. Families with Incomes of $5000 and o\ Good, or very good, time to buy 37* 4i* 57* 59* 68* 61* 61$ 57* Good time in some ways, but not in others, or i t depends Bad, or very bad, time to buy Don't know Not ascertained l 2 Total 100* 100* 100* 100* 100* 100* 100* 100* The question was: "Now about things people buy for their house - I mean furniture, house furnishings, refrigerators, stove, TV, and things like that. Do you think now is a good time or a bad time to buy such large household items?"

23 Survey Research Center Economic Behavior Program Table 9 Comparison of Opinions of Buying Conditions Durables. Cars, and Houses November-December 1956 Buying conditions for; Opinion of Buying Conditions; Durables Cars Houses Good time to buy 51* 36* 39* Good time in some ways, bad in others Bad time to buy Uncertain Not ascertained Total 100? 100? 100? The questions were: "Now about things people buy for their house - I mean furniture, house furnishings, refrigerators, stove, TV, and things like that - Do you think now is a good time or a bad time to buy such large household items?" "Thinking of the automobile market - do you think the next twelve months or so will be a good time to buy a car?" "Generally speaking, do you think now is a good time or a bad time to buy a house?

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