Arkansans 'Cautiously Optimistic’ about Economy

FAYETTEVILLE, Ark. — Results from the first Arkansas Omnibus Survey show that Arkansas residents have confidence in the American economy but are less optimistic about their personal finances and the U.S. economy than are Americans as a whole. Their opinions are reflected in three important indices of consumer sentiment.

The findings are based on opinions of a random sample of Arkansans who were interviewed by researchers at the University of Arkansas Survey Research Center. The opinions are summarized in the Arkansas Index of Consumer Sentiment and compared with the June 2005 national Index of Consumer Sentiment, an ongoing, monthly indicator of consumer perceptions of the current state of the economy and expectations about its future.  

Specifically, survey results indicated that Arkansas residents are less confident about current economic conditions than Americans in general. Arkansans also have slightly lower economic expectations than Americans as whole. However, despite the lower numbers when compared to Americans in general, Arkansans view current economic conditions positively and have optimistic expectations for the economy in the near future, said Molly Longstreth, director of the center.

“Results from the survey show that Arkansas residents are at least cautiously optimistic about the economy,” said Longstreth. “The survey represents adults from the entire state, so the feelings of the participants reflect both the economic growth in areas such as northwest and central Arkansas, as well as the less dynamic economic conditions in some other areas of the state.”

A close look at the survey, which consisted of five questions, revealed Arkansans’ opinions about current economic conditions and expectations for the future. Four out of 10 Arkansas residents think they are better off financially than they were a year ago. Another 33 percent think their financial well-being is the same as last year, and 26 percent of the state’s residents think they are worse off financially than they were a year ago. Almost 90 percent of the state’s residents expect their financial well-being to remain the same or improve over the next year. Only 10.4 percent think they will be worse off in one year.

The survey yielded interesting results about the consumer expectations of Arkansans. A large majority -- nearly 60 percent -- of the state’s residents think the present is a good time to buy major household items such as furniture, stoves and personal computers. The other 40 percent are evenly split between those who think now is a bad time to purchase these items and those who are uncertain whether now is a good or bad time to buy.

“These findings are important because a consumer’s decision to purchase, which is so vital to state and national economies, depends not only on ability but also willingness to spend,” Longstreth said. “The results show that Arkansans, for the most part, are confident enough about their economy to purchase things, even expensive items.”

Survey results showed that Arkansas residents are more optimistic about the state’s economy than they are about the U.S. economy. Forty-five percent foresee good economic times for the state, while only 29.8 percent think the national economy will experience good times over the next year. Three out of 10 Arkansans see bad times ahead for the U.S. economy, but only 18.9 percent think the state’s economy will fall on bad times during the next year.

Looking out five years, four out of 10 Arkansans predicted that the U.S. economy will experience good and bad times. Almost 24 percent said they think the American economy will experience good times only over the same time period. Finally, 35 percent of Arkansans predicted periods of widespread unemployment or economic depression in the United States over the next five years.

Longstreth emphasized that the results from the Arkansas Omnibus Survey reflect consumer perceptions of economic well-being rather than objective data about the health of the state and national economy.

“These are not objective but rather psychological measures of consumer well-being,” Longstreth said.

However, that does not lessen their value, especially for economists and legislators who shape public policy and business people who set production goals. Longstreth said the results measure consumer morale about the economy, which is closely linked to consumer investment. For example, consumer economists have demonstrated that people will spend money when they are optimistic about the economy. When they are pessimistic, consumers tend to save money and pay off debt rather than purchase items.

“Attitude and expectations measure willingness to pay,” Longstreth said. “Over time, these attitudes and expectations have been shown to affect consumer demand for goods and services. In this sense, the attitudes can be seen as predictors of economic turns.”

To conduct the survey, center researchers randomly selected 604 participants via a sophisticated, state-of-the-art, computer-assisted telephone interviewing system. Longstreth said interviewers were highly trained, and information received during the process remained confidential. Survey questions were offered in English and Spanish. The survey had an estimated sampling error of plus or minus 4 percent, and the cooperation rate was 38 percent. The research started on June 21 and concluded on July 10.

Established in 1998, the Survey Research Center conducts surveys and evaluations for a variety of organizations and is dedicated to providing high-quality, nonbiased information. For more information on the center and its research, go to http://survey.uark.edu/.

For a copy of the center’s report, please call or e-mail the contacts listed above.