In a recent Comscore survey, it became clear that while consumers are feeling better about economic conditions in the U.S., the majority still feel that that we have problems:
As we’ve tracked consumer sentiment over time, it’s clear that to fully understand the trends that are occurring one has to look at the differing attitudes of the key income segments. In the following chart we ask consumers to identify their single most pressing economic issue from a list of four: rising prices, unemployment, the financial markets and home values.
While jobs remain a key concern (with 36% of all consumers citing unemployment as their key economic issue), the rapid emergence of rising prices as the number one concern is all too evident, especially within the lower income segment where prices have supplanted unemployment as the number one worry by a significant margin. Even among the upper income segment, rising prices are now on a par with unemployment concerns. And when one delves into the price issue, it’s clear that gas prices dominate, with “rising gas prices” being cited by at least 20% of each income segment as the main economic concern. Below is a chart showing the rise in gas prices over the past three months:
While the turmoil in the Middle East and North Africa has driven up oil prices significantly, as yet we’ve not seen any disruptions in production or supply. However, the current Libyan unrest appears to have spread to a major oil producer for the first time, causing the price of “Brent” crude to hit $105 per barrel — a level not seen since September 2008. Going forward, it will be important for the digital economy to keep a close eye on oil and gas prices because a look back in time tells us that rising oil prices have historically had a dampening impact on e-commerce spending, as the charts below illustrate:
As gas prices began their rapid climb in 2007 (and later as they caused a knock-on increase in food prices) this gradually reduced the amount of disposable income in consumers’ wallets - to a degree that caused a slowdown in e-commerce growth beginning in late 2007 and into 2008. By the time gas prices had dropped again at the end of 2008, we were in the midst of a full blown recession with the meltdown of the financial markets, plummeting house prices and soaring unemployment. It took us until 2010 to see a recovery in e-commerce spending and the return of double digit growth rates.
So, as we look forward in the hope that job creation picks up, we need to also keep our fingers crossed that gas prices will settle back. History has shown that consumers’ willingness to buy online is heavily influenced by what they have to spend at the pump, for food and for the other necessities of life.