What does “consumer sentiment” really mean? And what does your sentiment — that being an attitude, thought, or judgment prompted by a feeling — have to do with how you make purchasing decisions? We wonder, because the consumer and the way consumers spend make up roughly 70% of this country’s economy.
Now, how you feel about the nation’s economy in general, and your personal financial situation in particular, is more to the point of measuring consumer sentiment.
This is an Opinion
Investopedia explains that “consumer sentiment,” that specific term, is what the University of Michigan measures through a survey of 500 American households.
“Consumer confidence,” or the Consumer Confidence Index, is what a nonprofit business research organization called the Conference Board snapshots via a sample of 5,000 households in the nine U.S. Census Bureau regions of the country. Both surveys are done monthly, but at different times during the month.
Here’s where it gets tricky. Consumer sentiment, the University of Michigan survey, reflects measurements for the past two months showing an increase in consumers’ overall positive attitude. While consumer confidence, the Conference Board’s numbers over the same period, have slipped to some of its lowest digits in a decade. Go figure.
Digging into the foundations of these differing measurements, we are instructed that there is, indeed, a difference in what the two indices appraise.
Consumer sentiment refers to a consumer’s perception of a specific product, brand or service. Consumer confidence, on the other hand, refers to the confidence of consumers in the broader economy and their own financial security in that economy. So while you may really like Apple products, or shopping at Walmart or Dillard’s, and are loyal to these brands, you may feel completely different about where you think the general economy is headed and how your own personal financial security will be affected.
Whatever does it all mean? Let us take a stab at it in the context of the prevailing season.
It is generally agreed that the holiday shopping season will outsell last year’s. We reported as much last month. One reason is the 2018 base from which the comparative numbers will be derived was lackluster, in light of a sinking stock market and a government shutdown. But, nevertheless, an increase, particularly in online holiday sales.
We believe what the difference in sentiment and confidence may tell us is that the power of the brand has never been more important. And promotional offers from these brands, brands that have a particular cachet attached to them, resulting in brand loyalty, need to be aggressive and prevalent throughout the season. So far, retailers appear to be pursuing this strategy.
One irritant to consumer marketers this year is that there are six fewer days between Thanksgiving and Christmas compared with last year, making that part of the shopping season the shortest since 2013. Bummer!
Oh, now we get it. That’s why holiday promotions started earlier this year than in recent memory, well before Halloween. And six fewer shopping days may be one of the reasons for the projected increase in online shopping. Meaning, as we said last month (we guess this column is Part 2 of that exposition), the consumer wins on product, price, promotion and the convenience of one- or two-day shipping and home delivery or retail pickup. The consumer further wins by paying attention to what the retailers are promoting to perhaps gain new customers, and new future loyalists, through this season’s nonstop hyping.
Consumers this year may be a bit conflicted over now and later, over us and them, as sentiment versus confidence suggests. The consumer may be saying, “I trust my brands, and where, how and how much I plan to spend this season in the places where I choose to shop. But the bigger picture doesn’t look too sporty. Think I’ll get past the holidays and reassess.” We’ll look for the statistical postmortem in January and reassess, as well.
So how are you feeling? In a good mood?