By Thomas Riehle Everything’s Different, Nothing’s Changed

Consumers react to the war ©www.arttoday.com

he immeasurable tragedy of this was a turning point that would that the government would foil all September 11, 2001, and ev- fundamentally change things forever. attempts made (25%). Most (55%) Terything that followed—the Only 21% believed that, once these did expect a few attempted terrorist attack on the World Trade Center and events had passed, life would return to attacks to succeed. the Pentagon, the crash of another normal. hijacked plane in Pennsylvania, the • Almost half, 48%, expected either November 12 crash of a plane taking hat has not changed since an end to terrorism (12%) or a reduc- off from New York’s JFK airport, the September 11, particularly tion in the number of terrorist inci- anthrax letters, anthrax hoaxes and W in the realm of consumer dents (36%) over the next five years, alarms, and all the general FBI warn- issues, is more significant than what while 46% expected the number of ings of imminent terrorist attack— has, however. terrorist incidents to stay the same means that everything has changed. (29%) or increase (17%). Americans are scared, but not terror- Almost from the instant the second ized, by events. As of October, Ipsos- Thus, Americans can be described as plane crashed into the World Trade Reid Express polls were finding that all-but-unanimously spooked by events, towers, American consumers knew— but evenly divided between those who and 74% of them told Ipsos-Reid in- • Almost everyone (92%) expected feel safe and those who feel vulnerable. terviewers in a survey conducted on further attempts at terrorism, but only Both insights are accurate and reflective the evening of September 11—that 10% expected many such attempts to of the public’s mood. succeed. o how have the terrorist events • Some 30% believed America as a affected Americans as con- whole was totally safe, expecting ei- Ssumers? As with expectations Thomas Riehle is president, US Public ther no more attempts at terrorism about terrorism and the war on terror- Affairs, Ipsos-Reid. here (5%) or expressing confidence ism, those of consumers reflect both a

12 Public Perspective, January/February 2002 surface unanimity of opinion on some ews issues and a division of opinion on the events same topics just below the surface. might “Consumer expectations reflect haveN overshad- both a surface unanimity of At the surface, Americans were initially owed consumer more confident in the US economy and personal fi- opinion on some issues and a after the attacks than they were before nance issues. them because they shared a newfound However, they did division of opinion on the same faith in all American institutions. not alter them. In the US and else- topics just below the surface.” For example, support for political lead- where, respon- ers and confidence in government in- dents expressed stitutions rose dramatically in the US grave concerns about their own per- will get theirs, even if they have doubts and around the Western world in the sonal financial situations and their pros- about whether others will be smart immediate aftermath of the terrorist pects for the year ahead. These con- enough, hardworking enough, or tal- attacks. That support for government cerns predated September 11. ented enough to succeed as well. was a necessary psychological response to terrorism—people had to believe As a result, in the single most startling ut over the course of the sum- government could effectively respond finding of any Ipsos-Reid poll con- mer and fall of 2001, there was to terrorism, or they would lose hope ducted in the US this year, we found Ba growing sense of confusion of living their lives in peace. on September 21-23 that fewer Ameri- among individual Americans about their cans believed their personal economic personal financial prospects. People The sudden growth in confidence in situations would improve (46%) than worried about career opportunities. It institutions extended to the US believed the same about the national had seemed the future was in technol- economy. In October it led to new economy (53%; see Figure 1) . ogy and communications careers, but assurance for 71% of the public that the then the technology sector (and espe- US was on the right track. A majority As far as I know, there has never cially the telecommunications and pub- expected the overall economy to im- before been a moment when Ameri- lishing sectors) collapsed, and layoffs prove in the next year, and the number cans were more likely to believe that ensued. It became clear that US manu- expecting a national economic recovery others would prosper financially than facturers would ship fewer computers more than doubled, from 21% in March to think they would prosper them- in 2001 than they did in 2000—a first to 53% in September. selves. Americans always think they in the history of that industry.

Americans had also come to be- lieve that personal wealth was built by riding the stock market Figure 1 bubble. More than half of all Higher Hopes for US Economy Than for Own American households owned stocks or mutual funds. The Questions: dot-com bomb and collapse of the broader stock market dis- Thinking about the next year or so, do you, yourself, generally feel that the economy here abused investors of that notion, in the US will improve, stay the same, or get worse? ...Do you think your personal economic situation will improve, stay the same, or get worse? and altered fanciful retirement plans that had been built no Percent responding will improve more solidly than so many castles in the air. March 1, 2001 September 21-23, 2001

US economy erhaps September 11 in- 21% 53% tensified those feelings of personal vulnerability, Personal P 46% situation 54% but probably it did not. Con- cerns about job security and

Source: Surveys by Ipsos-Reid, latest that of September 21-23, 2001. negative personal financial trends had risen sharply to a

Public Perspective, January/February 2002 13 ar or cording to a November 9-11 NBC Figure 2 no war, News/Wall Street Journal poll. Big-Ticket Desires W politi- cians will find that erhaps most surprisingly, not Question: unless they address much altered in the individual people’s concerns spending plans of consumers, Please imagine for a minute that you came upon $1,000 P about their finan- either. In that same NBC/Wall Street to spend on the following five types of items: home entertainment or electronics, home improvement, vaca- cial futures, their Journal poll, about one in three Ameri- tions or leisure travel, local entertainment, [or] clothing own job security cans reported making changes in or other personal items. Assuming that you had to spend and employment opening mail, going to shopping the $1,000 on these five items, and that you could spread prospects will be malls, attending sporting events and the money over several categories or spend it all in one limited. Although concerts, and making travel arrange- area, how much of the $1,000 would you spend on each? George W. Bush’s ments, but two-thirds had not begun job approval rat- doing anything differently in that very ings have reached broadly-defined realm of personal Home improvements 36% a record high in consumer behavior. the wake of the at- Vacation 24% tacks, Americans Ipsos-Reid polls on consumer issues do not automati- also found only a small minority of Clothing 15% cally support the consumers expressing plans to make president and the changes in spending, investment, sav- Republicans on all ings or travel specifically as a result of Home entertainment 15% issues. Preference the September 11 events. Only 18% for the Demo- of Americans in the September 21-23 Local entertainment 10% cratic or the Re- poll reported they were changing their publican approach air travel plans, and of that number,

Note: Mean scores reported. on issues in a Sep- only two-thirds were making a perma- Source: Survey by Ipsos-Reid, October 26-29, 2001. tember 28-30 nent, safety-related reassessment of Ipsos-Reid Ex- their own air travel. press poll remained about what it was before the war. Democrats were still (The other one-third, representing peak in the days just prior to the favored over Republicans on the envi- about 6% of all Americans, said they terrorist attacks—not as a result of ronment, health, Social Security, em- were delaying travel plans to avoid them, but before they occurred. ployment and education issues, while airport hassles, but would return to the Republicans continued to enjoy their air once the hassles ended—an inten- A Gallup analysis of attitudes about previous edge on economic policy and tion that was borne out in the reality of personal finances and investment on issues relating to morals and val- more and more air travelers as the found that in four publicly released ues, defense, government spending weeks went on. All that came prior to surveys for which time-series com- and tax policy. the November 12 crash, however.) parisons are available—including Gallup’s own data, Gallup’s polls of Specifically, when it came to a stimu- The purest measure of consumer investors for UBS/PaineWebber, the lus package for dealing with the eco- spending intentions came in an Octo- University of Michigan consumer sen- nomic recession, Americans were ber 26-29 Ipsos-Reid Express survey, timent index, and the ABC News/ closely divided between the two sides in which respondents were handed an Money magazine poll—the general in the debate. Fifty percent favored tax imaginary $1,000 windfall and asked trends in consumer confidence, in- cuts for individuals to stimulate spend- what they would spend it on if they vestor expectations, and perceptions ing, and especially for businesses to had to spend it all (see Figure 2). of personal financial prospects were encourage investment and create jobs, down, and in some cases down sharply, while 43% preferred an extension of The pattern of the responses roughly in the weeks leading up to September unemployment benefits for laid-off reflected what overall average spend- 11, and they remained largely un- workers and help in paying their health ing would be in these categories in changed afterward. care premiums, and funding for pub- normal times: more money was ear- lic works programs to create jobs, ac- marked for big-ticket home items and

14 Public Perspective, January/February 2002 family travel, while smaller-ticket items breakdown in confidence about per- they were in the excruciatingly close such as clothing, home electronics and sonal finances, job prospects, and earn- election of 2000, despite the sudden and near-unanimous rallying behind the leadership of President Bush.

ar or no war, Americans will “The coincidence of dates may make expect government action it appear that the war on terrorism is Wto address their job and sav- ings concerns as much as they expect it affecting consumer attitudes, but the to relieve their security and safety con- cerns. The politics of that response will evidence so far is that it is not having be closely fought, and in that sense nothing has changed—America remains a major impact.” a country where the politics of domestic financial and fiscal policies are not domi- nated by either major party. local dining or entertainment attracted ings on savings, which grew through- fewer mentions. out the summer of 2001 and reached a It will be difficult to know when the peak in the first week of September, that war on terrorism has been won, or lost. We don’t see in this distribution any will have the biggest impact on con- Similarly, it will be difficult to know wild swings toward or away from any sumer and business trends. exactly when the corner has been turned form of spending. Vacation travel on consumer concerns. What does desire remained high; whether con- How the government responds to that seem clear is that for now, the issues sumers had the money in the bank to breakdown will not be affected by the and events of the war are largely unre- afford vacations was another matter, war, either. Politically, Americans lated to the issues and concerns of unrelated to the terrorist attacks. In seem as divided on policy issues as consumers. short, the events of September 11 had little effect on the impulse to spend money.

here is a war on, a strange war with none of the massive mobi- Tlizations, increased military spending, consumer spending restric- tions or rationing, wage and price con- trols, or other changes in the lives of consumers that normally characterize a country at war.

The coincidence of dates may make it appear that the war on terrorism is af- fecting consumer attitudes, but the evi- dence so far is that it is not having a major impact. That does not mean that Americans’ spending and savings plans post-September 11 will match those of the years preceding the events of that black day. In fact, we are unquestion- ably in a period of substantial retrench- ment in consumer spending.

The cause of that retrenchment is not the war, however. Rather, it is the

Public Perspective, January/February 2002 15