Index of Consumer Sentiment (ICS)

The Index of Consumer Sentiment is a measure of households’ attitudes about current and future economic conditions. Of the three reported here, it is the most comprehensive and includes information about current economic conditions as well as future expectations. The Pensacola MSA’s ICS in October was 92.7. This is slightly higher than the University of Michigan’s calculation for a nationally-representative sample (89.6). While we would urge caution in interpreting these figures, this is suggestive that households in our sample of the Pensacola MSA were slightly more optimistic about current and future economic conditions in the region than were respondents in the national survey.

However, when we disaggregate this comprehensive index into its components, results presented here are suggestive that respondents to our survey were comparatively more optimistic about future economic conditions for themselves and for the region than they were about current conditions.

Index of Current Economic Conditions (ICC)

The Index of Current Economic Conditions (ICC) measures households’ current sentiment about financial conditions and their propensity to purchase large ticket consumer durables such as furniture, appliances, etc. We calculated this to be 93.6 in October. This is slightly below the nationally representative sample at 99.9. This is suggestive that households in the Pensacola MSA are less optimistic about their current economic conditions than the nation as a whole.

Breaking this down into its components (Questions 1 and 5), however, respondents were still quite optimistic (even if not as optimistic as nationally). For example, findings from Question 1 suggest that roughly 28 percent or respondents felt they were worse off in October 2003 than at the same time a year ago, while nearly three-fourths (71.7 percent) felt they were better off or the same. Similarly, results presented in Question 5 indicate that over half (53.8 percent) believed that it was a “good time” to buy major household items and only 13.7 percent believed it was a “bad time.” Thus, current consumer sentiment was still quite favorably disposed towards making large purchases. To the extent that the past recession appears to have had less of an impact on the region, it may be that local households experienced less pent-up demand than those nationwide.

Index of Consumer Expectations (ICE)

The Index of Consumer Expectations measures households’ expectations about the future economic conditions. We calculated this to be 92.2 in October 2003. Comparing this to a value of 83 for the national sample, it appears that respondents in our survey were more optimistic about the future than those nationwide.

The ICE is based on questions 2 – 4. In question 2, respondents were asked whether they believe they will be better off financially in a year. Of the 423 respondents, only 37 (8.7 percent) believed they would be worse off while the vast majority (85.6 percent) expect to be better off (38.1 percent) or the same (47.5 percent). The rest (5.7 percent) did not know. Respondents were slightly less optimistic when it came to their attitudes about future business conditions in the region (question 3). Over half (53.3 percent) were on the fence while 30.4 percent expected there to be “good times” or “mostly good times” for business in the next 12 months. Still, only 9.4 percent of the 424 respondents to our survey believed the next 12 months would hold “bad times” or “mostly bad times” for businesses in the region. Looking at a five-year horizon, respondents expressed similar expectations. Half of the 422 respondents expected “some good times & some bad times” while nearly one-third (32 percent) expected “good times or “mostly good times” during the next five years. Only 11.6 percent expected “mostly bad times” or “bad times.”

In sum, local residents are quite optimistic about the future economic conditions in the Pensacola MSA, especially when compared to the national sample. Roughly half expected economic conditions to remain about the same over the next 12 to 60 months.

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