Economic Pessimism Eases

Economic pessimism has eased from its post-hurricane high as gas prices have fallen precipitously, but the public's economic outlook remains negative and consumer confidence lingers below average.

Two months ago, in the wake of the Gulf Coast hurricanes and soaring gas prices (they peaked at $3.07 a gallon on Sept. 5), economic pessimism spiked to its worst level in more than 13 years and consumer confidence to its lowest in more than two. Now, with gas significantly cheaper (it's now $2.30), expectations about the economy's future and confidence have improved as well.

Even though gas prices are down for a sixth consecutive week and pessimism has eased, the public remains generally negative. The ABC News/Washington Post Consumer Comfort Index now stands at -18 on its scale of +100 to -100, virtually unchanged from last week, but below its average for the year, -13.

EXPECTATIONS -- Consumers' expectations for the economy, measured separately, show a broadly pessimistic public, but one that's become somewhat more optimistic over the past two months. A majority says the economy's getting worse, but that's down eight points from two months ago. And the percentage saying the economy is getting better is up to 18 percent from a paltry 9 percent last month.

INDEX -- The weekly ABC/Post CCI is based on Americans' ratings of the current national economy, the buying climate and their personal finances. This week, 36 percent rate the economy positively, just below its 2005 average. Thirty-two percent call it a good time to buy things, but more -- 55 percent -- say their personal finances are in good shape.

TREND -- At -18, the index remains in the narrow band between -17 and -21 that it's held since October. Before this relatively stable period, the index had fallen sharply from -7 (tying its 2005 high) in mid-August to -23 (its low for the year) in mid-September in the aftermath of the hurricanes and the steep rise in gas prices.

GROUPS -- As usual, the CCI is higher in better-off groups. It's +35 among higher-income Americans but -50 among those with incomes under $15K; -1 among college graduates while -47 among those who haven't finished high school; -14 among whites but -46 among blacks; and -5 among men while -29 among women.

The gap in confidence between Democrats and Republicans, while recently narrower than average, is now back up to 65 points, 23 points higher from a month ago. The index is +26 among Republicans and -39 among Democrats.

Here's a closer look at the three components of the ABC/Post CCI:

NATIONAL ECONOMY -- Thirty-six percent of Americans rate the economy as excellent or good, up three points from last week. The highest was 80 percent on Jan. 16, 2000. The lowest was 7 percent in late 1991 and early 1992.

PERSONAL FINANCES -- Fifty-five percent say their own finances are excellent or good; it was 56 percent last week. The best was 70 percent on Aug. 30, 1998, matched in January 2000. The worst was 42 percent on March 14, 1993.

BUYING CLIMATE -- Thirty-two percent say it's an excellent or good time to buy things, unchanged from a week ago. The best was 57 percent on Jan. 16, 2000. The worst was 20 percent in fall 1990.

METHODOLOGY -- Interviews for the ABC News/Washington Post Consumer Comfort Index are reported in a four-week rolling average. This week's results are based on telephone interviews among a random national sample of 1,000 adults in the four weeks ending Nov. 13, 2005. The results have a three-point error margin. The expectations question was asked of 500 respondents Nov. 2-13; that result has a 4.5-point margin of error. Field work by ICR-International Communications Research of Media, Pa.

The index is derived by subtracting the negative response to each index question from the positive response to that question. The three resulting numbers are added and divided by three. The index can range from +100 (everyone positive on all three measures) to -100 (all negative on all three measures). The survey began in December 1985.

The Washington Post replaced Money magazine as cosponsor of this index at the start of this year. The survey methodology remains the same.

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