While the most recent Tennessee Consumer Outlook Survey showed a dip in current consumer confidence mixed with a rosier outlook for the future, the recent economic impacts of the rapidly involving coronavirus outbreak make survey results subject to more volatility.
The latest Tennessee Consumer Outlook Index dropped to 212 this month from 254 in December, reports the Office of Consumer Research in the Jennings A. Jones College of Business at MTSU.
The current online survey of 630 Tennessee consumers was conducted between March 2-5 as the COVID-19 coronavirus outbreak garnered more attention and as Middle Tennessee was devastated by a cluster of deadly tornadoes that caused millions in damages.
"Last week, we found that consumers in Tennessee had become less positive about the economy, but they became slightly more optimistic about the future economy," said Tim Graeff, marketing professor and director of the Office of Consumer Research.
But any positives found in the latest survey have to be kept in context, Graeff noted, since concerns surrounding coronavirus have exploded the past week as the outbreak was deemed a pandemic and the stock market continues to plummet since the survey was conducted.
The survey, which has a margin of error is 4%, includes a variety of questions such as President Donald Trump's handling of the economy and the coronavirus outbreak, consumer outlook by political party affiliation and trust perceptions of Democratic presidential nominees in handling the economy. To see the full report and previous reports, go to https://www.mtsu.edu/consumer/tnoutlookreports.php.
"Given the fluid nature of the situation with the coronavirus and the dramatic events that resulted from it this week, we cannot be certain how consumers feel today. But, it is safe to say they now have more reasons to be concerned about the possible negative effects of the coronavirus on the economy."
Graeff pointed to factors such as the recent travel restrictions from Europe announced by President Donald Trump, the continued stock market dive, the NBA's decision to suspend their season, NCAA basketball tournament cancellations and colleges and universities suspending in-person classes in lieu of online classes.
"This can all lead to increased fear, anxiety, uncertainty, and concern among consumers," he said. "But, it is important to identify the problem."
Problem No. 1 right now for the economy is the coronavirus, and to illustrate, Graeff used the example of having your fine-tuned car trapped in a snow and ice storm and unable to be used.
"This is the situation with the coronavirus. Our economy is the car, and the coronavirus is the snow and ice storm. Our economy is strong stable, and resilient. Unfortunately, the coronavirus occurred and it can possibly have a significant negative impact on our economy."
Graeff also pointed to the U.S. economy's reliance on the service sector — a full 80% of the gross domestic product, or GDP — rather than manufacturing or agriculture.
"And, many of these services cannot be inventoried for later sale. This means that if consumers decrease their spending on such services as travel, hospitality, entertainment, and dining out, these lost sales can never be made up in the future," he said. "The potential revenue from a cruise ship cabin that goes vacant for a one-week cruise is lost forever."
Such reduced consumer spending can "have a snowball effect," he added.
"Service providers will have less revenue, which means they might have to lay off some employees, which means those employees will have less money to spend, which means they will likely spend less, which perpetuates this self-fulfilling prophecy."
