Consumer Confidence Comes Full Circle in 2005

After dipping not once but twice this year, consumer confidence ends 2005 about where it began. While not a stellar year, 2005 draws to a close on a positive note, a good sign of resilience after it took some big hits.

The ABC News/Washington Post Consumer Comfort Index ends the year at -10 on a scale of +100 to -100, nearly at its level at the start of 2005, -9 on Jan. 2. It's been a bumpy ride in 2005, largely because of spiking gasoline prices: The index first dipped in May to -19 but rebounded during the summer before sinking again in September, to -23, in the wake of a nasty hurricane season. It rallied once again in November and December, ending the year on an upswing, gaining 11 points over the past eight weeks.

As a whole, 2005 has turned out quite average. This year's average index, -13, is near its 20-year average, -9, and hovers close to its average for 2004, -11. Confidence has been much better and much worse: The CCI averaged as high as +29 in 2000 and as low as -44 in 1992.

INDEX -- The weekly ABC/Post index is based on Americans' ratings of the current national economy, the buying climate and their personal finances. This week 39 percent rate the economy positively, 37 percent say it's a good time to buy things and 59 percent say their personal finances are in good shape; each is near its average for the year and its long-term average in weekly polls since late 1985.

TREND -- The year began at -9 and remained relatively stable until the index dipped in the spring to -19 on May 1 as gasoline prices rose. It rebounded during the summer, hitting its high for the year, -7 on July 24 and again on Aug. 14, but then dropped again in the fall. It sank to its low for the year, -23, on Sept. 18, following Hurricane Katrina and near-record gas prices (gas hit $3.07 a gallon on Sept. 5), before rebounding again as the year drew to a close.

With a -13 average for the year, the index's annual averages have been both much better and much worse. The CCI averaged highs of +24, +28 and +29 in 1998, 1999 and 2000 respectively, and lows of -44 in 1992, -37 in 1993 and, most recently, -19 in 2003.

GROUPS -- As usual, confidence is higher among better-off groups. It's +38 among higher-income Americans but -53 among those with the lowest incomes, +3 among college graduates while -48 among those who haven't finished high school, -7 among whites but -29 among blacks and +3 among men while -21 among women.

As has been the case all year, the index is far higher among Republicans (+34) than among independents (-23) or Democrats (-37). The gap in confidence between Democrats and Republicans continues to be wide, at 71 points.

Regionally, the index ends the year best in the West, now -2, compared with -18 in the Midwest, -16 in the Northeast and -6 in the South.

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

NATIONAL ECONOMY -- Thirty-nine percent of Americans rate the economy as excellent or good; last week it was 38 percent. The highest was 80 percent on Jan. 16, 2000. The lowest was 7 percent in late 1991 and early 1992.

PERSONAL FINANCES -- Fifty-nine percent say their own finances are excellent or good, unchanged from 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-seven percent say it's an excellent or good time to buy things, unchanged from last week. 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 Dec. 25, 2005. The results have a three-point margin of error. Field work is by ICR-International Communications Research of Media, Pennsylvania.

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 co-sponsor of this index at the start of this year. The survey methodology remains the same.

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