ACSI: In ominous sign, customer satisfaction plummets for 4th straight quarter
Overall U.S. customer satisfaction is on the decline — and that does not bode well for the economy.
That’s according to the American Customer Satisfaction Index (ACSI), which found that customer satisfaction in the third quarter dropped — for the fourth consecutive quarter — 0.9% to a score of 75.7 (on a scale of 0 to 100). While the previous drops were modest, that is no longer the case. The third-quarter decline, which was across every sector tracked by the ACSI, is equivalent to an annualized decrease of 3.6%.
“This is the largest ACSI decline in five years,” said Claes Fornell, founder and chairman, ACSI. “Not since the first quarter of 2014 has there been an overall annualized drop greater than 3%. Back then, GDP also shrunk by more than 1%.”
Current GDP growth is positive, but weak at 1.9%. Many analysts point to what they consider strong consumer spending growth of 2.9% as saving the economy in third quarter, but it’s difficult to find much evidence for suggesting that “the U.S. economy is in a good place,” Federal Reserve vice chairman Richard Clarida proclaimed as the Fed cut its benchmark interest rate, the ACSI report pointed out.
For the economy to grow at a healthy clip – say about 3% – consumer spending growth needs to be about 4% on average. There’s no evidence that such spending is imminent, according to ACSI. On the contrary, declining customer satisfaction tends to push demand curves downward and put pressure on price in order to even sustain the current level of demand.
In addition to the drag on economic growth from declining customer satisfaction and less-than-robust consumer spending, the economy also faces a lack of business confidence, as evidenced by a reduction in capital spending. It too contracted by 3% in the third quarter.
Here is more from the most recent ACSI report:
Weak customer satisfaction and a lack of business confidence about the near future do not suggest a strong economy. Instead, they suggest uncertainty about consumer spending.
The latter is affected by customer satisfaction expectations from consumption of goods and services, changes in household discretionary income, and in prices. Expectations are formed from previous shopping and consumption experience, which is a bit wanting.
While there isn’t much evidence of inflation, wage growth has plateaued, and customer satisfaction has plummeted. Somewhat paradoxically, perhaps, today’s near-full employment levels don’t help increase customer satisfaction. Instead, high levels of employment tend to increase employee turnover, especially in services industries, with negative effects on customer service and therefore on customer satisfaction.
There are several signs suggesting near-term economic distress. Falling customer satisfaction and weakening business confidence are major ones. Plateauing wage growth doesn’t help. In addition, U.S. productivity is on shaky ground. It’s much below its long-run average and actually fell in the third quarter.
Productivity is a counterpart to ACSI in some ways. Both are important for economic growth. Productivity is about doing more with less. But in a service economy it can be at odds with quality of service and customer satisfaction. As a result, it’s not unusual for ACSI to increase at the expense of productivity and vice versa. For both to deteriorate at the same time is worrisome and quite unusual.
The national ACSI score reflects customer satisfaction across sectors and industries over a rolling 12-month period. For more, follow the ACSI on LinkedIn and Twitter at @theACSI or visit theacsi.org.