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Affluent Consumer Confidence Reaches Highest Levels
CLEVELAND -- Although optimism among affluent Americans regarding the overall state of the economy reached its highest level in six straight quarters -- according to the latest McDonald Financial Group Affluent Consumer Confidence Index released today -- affluent confidence in the future of the national economy dropped for the first time since the Index began in January 2003. Concerns regarding the future national economy were driven by worries concerning unemployment, the national deficit, the S&P 500, and terrorism.The overall McDonald Financial Group Affluent Consumer Confidence Index score was 57 out of 100 -- a 2% improvement since the last survey in January. This represents the highest index score since the survey began in January 2003.The index, a quarterly measure of market sentiment, is based on a national survey of randomly selected individuals with investable assets of $500,000 or more, or personal annual income of $150,000 or more. "The growth in optimism we've been seeing for the past year and a half is beginning to be tempered, for the first time, by concerns about the future of the national economy," says Carol Klimas, executive vice president, McDonald Financial Group "While the affluent demonstrated positive spending, charitable giving and investing behaviors in the first quarter of the year -- demonstrating their faith in current conditions, we find it significant that looking forward they are now beginning to express concerns about continuing unemployment, a growing deficit and other economic issues."We believe that regularly surveying the nation's affluent population is important from several standpoints," Klimas adds. "By virtue of the fact that many of the affluent are business owners or serve in executive positions where they are responsible for making capital expenditure and hiring decisions, their opinions can be an important barometer of where the economy is headed. McDonald Financial Group has also found that surveying the affluent on a quarterly basis -- and gaining these types of insights -- helps us better understand the real-time attitudes and concerns of our client base, enabling us to offer more proactive, insightful counsel on a broad array of integrated banking, trust and investing solutions."For the first time since the debut of the survey, confidence among affluent Americans about the future of the national economy has declined. For example, examining the short-term economic outlook, just over half of respondents (51%) said they believe the economy will get better in the next three months, representing a 10 percentage point decrease since last quarter, when a full 61% said so. In the survey, 9% said the national economy would get worse in the next quarter, up from only 3% who said so in January.Although a majority (62%) still feels that the national economy is going in the right direction, there has been a 6 percentage point decrease since last quarter (68%). Additionally, a third (33%) of respondents said the economy is on the wrong track, up sharply from 25% who said so in January.The study also found that the economic situation is worsening for some affluent Americans. The percentage of those who say their own personal economic situation has worsened in the last three months has increased from 0% in January to 11% this quarter. Some 36% say their economic situation has improved, which is down from 40% who said so in January.Growing concerns about the future economy among the affluent appear to be linked to key issues:Persistent unemployment: Affluent Americans continue to see the employment environment as difficult, although marginally better than three months ago.45% say jobs are "not so plentiful," up from 43% in January. However, more than a third (36%) said jobs are "hard to get," which is down from 41% in January.16% said jobs are "plentiful," an increase from the 13% who said so in January.77% affluent Americans are concerned about the national deficit, while 41% are "very concerned."These levels are similar to last quarter's results in which 80% were concerned and 43% were "very concerned" about the deficit.Growing view that the stock market has peaked: The latest survey shows a decrease in confidence toward the Standard & Poor's 500 over the next three months.53% of respondents said they see the S&P 500 Index rising over the next three months, a significant drop from the 73% who said so last quarter.14% see the S&P 500 falling over the next quarter, up 10 percentage points from 4% in January.When asked what is the most important issue facing the country today, 34% said "terrorism," followed by 22% who chose "economy/slow economy," 11% who said "jobs/unemployment" and 8% who said "Iraq/war with Iraq."Despite serious concerns raised in the latest survey, the all-time high overall Index score is supported by increased spending intentions among the affluent as well as optimism about local economic conditions. Some relevant findings include:Ratings of the local economy continue to improve, with 64% saying the state of the local economy where they live is "excellent" or "good," a sharp climb from 55% in January.Intentions to plan a vacation requiring air travel in the next three months are at their highest levels in the survey, up 8 percentage points (68%) since last quarter (60%) and up 13 percentage points from one year ago (55%).Plans to purchase a home during the next quarter are up since January, with 7% saying they plan to buy a home, up from 5% in January; 9% said they plan to buy a second home in the next three months, up from 5% last quarter.Charitable giving has increased, with 36% of respondents saying they gave more to charity last year than they did the previous year.The percentage of business leaders polled in the survey who report that their firm plans to increase hiring over the next three months has increased 8 percentage points since last quarter -- from 32% in January, to 40% in the latest survey. 57% of the affluent consumers interviewed in the survey qualify as "business leaders" -- meaning they own their own businesses or are senior-level executives.Half of affluent Americans say their personal financial situation is better today than it was four years ago and that the economy will be a more important issue than foreign policy in the 2004 elections, the survey found "This suggests to us that this group believes the economy has not fully recovered and is still a serious issue to watch carefully," Klimas notes.The affluent also demonstrate concern about the deficit, showing that they prefer deficit reduction over further tax cuts. Additional findings include:56% of affluent Americans say the economy will likely be the defining issue of the campaign, while 37% say foreign policy will be the defining issue.Compared to survey results for January of 2004, there has been a five percentage point increase in the number of respondents who believe that foreign policy is more likely to take center stage in the election. This research corresponds to a time of increased conflict in Iraq and public interest in the 9/11 Commission hearings.Among the issues affluent Americans believe will be the most important in the campaign are: the economy (73%), terrorism/safety/security (46%), Iraq (40%), healthcare (21%), jobs/unemployment (17%), deficit (12%), taxes (11%), education (7%), and foreign policy (7%).Two thirds (65%) say they do not believe unemployment will improve by the time of the presidential elections in November, compared with 26% who think unemployment will decline significantly by November.66% believe that deficit reduction should be the focus for the U.S. economy, an increase of 7% since last quarter. Only 30% surveyed said tax cuts should be the focus. By comparison, January 2004 survey results showed that only 59% believed deficit reduction should be the focus for the U.S. economy, while 39% said tax cuts should be the focus.McDonald Financial Group is part of KeyCorp, one of the nation's largest bank-based financial services companies. Visit KeyCorp: www.key.com "