Post-election outlook shifts to: Expect worse, hope for best

NATIONWIDE RT REPORT —During a year in which predicting retail performance for the all-important holiday selling season has begun to resemble a game of pin the tail on the donkey, a blindfold is only one of the challenges now facing sales forecasters. Much like an anxious donkey with an acute case of A.D.D., the economy keeps jumping up and down, and with it goes the mood of many forecasters—one day talking of Armageddon, the next day pointing to signs of hope.

Bringing a slight ray of optimism to the picture are two important factors that have suddenly surfaced: the precipitous drop in fuel costs, both at home and at the pump, and the recent resolution to the presidential election, which many believe has been the greatest contributing factor over the last 18 months to indecision and lack of consumer confidence.

The fact that fuel costs, long considered a bellwether of consumer spending potential, are even mentioned in economic circles these days hinges on the sudden and dramatic effect they are having on consumers’ pocketbooks. Where the national average for a gallon of regular, unleaded gas ran as high as $4.11 at the height of the summer travel season back in mid-July, the current national average (as of Oct. 30) is down more than 37% to $2.55, and is expected to continue to drop. For the millions of Americans who rely on their vehicles each day, especially those who have grown accustomed to budgeting $4-per-gallon fuel expenses, this economic dynamic equates, simply, to more cash in hand.

However, other elements fighting for mindshare of the consumer psyche these days include joblessness, personal savings and the much-maligned federal economic bailout, which have led to an all-time low in consumer confidence last month, as reported by the Conference Board. In October, the group reported that confidence had dropped to 38 basis points, down from 61.4 in September (the survey’s baseline of 100 was set in 1985).

Many economists have speculated, however, that this consumer trepidation is only partially attributed to real fear. Instead, they point to the presidential election, particularly the campaign rhetoric, which essentially bombarded voters with a message about how bad things have become. “It’s badly broken,” both candidates chimed, “And I’m the man to fix it.” It stands to reason, therefore, that with the election over, that message will now change considerably, shifting from one of negativity to one of constructive, pro-active planning. And this, the thinking goes, will alleviate, if for nothing else, the indecision that has occupied consumers’ minds.

In late October, for example, when many reputable national polls reported that Barack Obama had taken a sizeable, mostly insurmountable lead over John McCain, consumer confidence began to stabilize ever so slightly, and at least in one case, it began to show improvement. According to the weekly ABC News Consumer Comfort Index, which uses a scale of -100 to +100, consumer confidence for the week immediately prior to election week saw a slight uptick in confidence (to -49, from -50), and despite all of the negative economic news, did not drop under its record low of -51 set in May, when news of rising fuel prices dominated the news.