The Consumer Condition: Waiting for Recovery

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 Americans remain reluctant to spend amid continued uncertainty

As the U.S. heads into its third year of a post- recessionary economy (technically speaking, anyway), Americans’ outlook continues to deteriorate, according to AlixPartners 2011 U.S. Economic Outlook¹. Sixty-nine percent feel “not good” or “bad” about the direction of the economy, compared to 63% in May 2011 and 59% one year ago (figure  1). A full 89% don’t see a recovery until 2013, if ever, compared to 83% in May 2011. And another 64% say they don’t see a recovery until 2014 at the earliest.

These numbers are significant, and they carry considerable implications for businesses both in the U.S. and abroad.

UNEASY AT HOME

Americans’ concern about their personal family economic situations is rising. Forty percent are “extremely concerned” or “very concerned”, compared to 33% in May 2011 and 31% one year ago. At the same time, the percent of those “not at all concerned”—always a small group—has continued to shrink down to 5% from 6% in May and 9% one year ago (figure 2).

Some 43% feel worse about their personal economic situations than they did one year ago, versus 35% who said so in May 2011 and 34% one year ago; just 20% expect to see improvement in their situations over the next 12 months (down from 27% in May 2011). More than half of Americans (52%) expect to see no change in their personal financial situation in the coming year.

SEARCHING FOR SIGNS

As they wait for economic recovery, Americans are watching the unemployment rate closely. A full 70% cite further decreases in the country’s unemployment rate as a key indicator of economic recovery, followed by a reduction in the national debt level (56%), a reversal of recent stock market declines (39%) and a gain in the value of their homes (39%) (figure 2).

For ty-eight percent of those feeling “not good”or “bad” about the economy blame Washington, with 25% citing the lack of the right kind of economic measures from the Federal government and another 23% citing the national debt as the root of the nation’s economic woes.

For more than half of Americans, “promoting economic growth” means (1) a reduction in the national debt and (2) jobs creation measures offset by  reductions in other areas (to foot the bill).

PLANNING TO SAVE

Looking ahead over the next 12 months, Americans say they will continue to focus on personal savings and debt reduction. More than half (67%) say they plan to save or invest the same or more in the next 12 months as they have in the last 12 months. And the percentage they say they will save remains high: 14% of income. While the self-repor ted expected savings rates are likely to be influenced by the emotions of the day, the consistently high reported rates may be strong indicators that consumers do intend to continue to curb their spending. They also continue to repor t plans to delay major purchases, such as vacations away from home, household furniture, and major electronics (figure 3).

In the shor t term (defined as the next six months), only 26% say they plan to invest in the stock market. When the timeline is extended to three years, only 37% plan to invest.

IMPLICATIONS FOR BUSINESS

In wave after wave of consumer research since February 2009, Americans have cited the same key concerns: personal debt and potential job loss. In May 2011, fuel costs appeared as a central worry among Americans, and remain at the top of the list now. Americans site rising fuel costs (14%), possible job loss or cutbacks (14%), and personal debt levels (13%) as the top three concerns about their personal economic situations in the coming year.

At the same time, Americans continue to push the timeline for an expected return to prerecession lifestyle (including spending) into the future. In February 2009, Americans expected a recovery in just over three years; in September 2011, Americans still expect another three years before resuming a “normal” lifestyle (figure 4).

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This repeated delaying of a resumption of “normal” consumer spending is of critical importance to companies across industries. In a world driven by  consumer spending (70% of U.S. GDP; 16% of global), where the consumer goes, so does the economy. Companies cannot continue to wait for this economic cycle to give way to a rising tide of revenue. To survive and succeed, management must devise and implement new strategies for unding and driving growth in a muted business environment while anaging through continued economic volatility and uncertainty.

¹The AlixPartners 2011 U.S. Economic Outlook survey polled 1,000-adult, demographically representative sample of the U.S. population, from September 27-30, 2011, on views and expectations about the U.S. economy and personal spending behaviors.