Business owners and consumers alike can fall into a trap of thinking of the economy as a singular thing. It’s why everyday people give one word answers when asked how the economy is doing. It’s also why the media pays so much attention to the movements of the Dow Jones Industrial Average, even though the Dow is a fairly useless metric for measuring the health of the macroeconomic system.
Rather than thinking of the economy as one thing, it’s more useful to think of it as many smaller economies. So consumer confidence and economic outlooks can vary greatly depending of the race, gender or socioeconomic status of the consumer. Understanding and utilizing these variations gives business owners and opportunity to increase their effectiveness within a target market. Researchers at the Florida Atlantic University recently released a study that showed some of these variations when they poll Hispanic consumers about the economy. The FAU poll of Hispanic consumers found this demographic has higher consumer confidence levels than in previous polls, but they also have serious concerns about the future.
The Florida Atlantic University Business and Economics Polling Initiative (FAU BEPI) in the College of Business surveyed Hispanic consumers to gauge their opinion on issues such as how they felt about the current economic conditions, how they felt about the future, and other questions that helped to determine their current and estimated level of consumer activity.
After plummeting eight points in April, the Index of Consumer Sentiment rose for Hispanics during the month of May. The current situation portion of the index rose 1.32 points during the month to reach 92.9. Though Hispanic consumers are feeling better the current situation, they were slightly less optimistic about the things in five to six months.
The index has five components and the current situation is the only one where the rate was improvement. Overall, consumer sentiment among Hispanics fell by two points in May to 89.77, the lowest level seen since January. The most notable declining component was the “expectations of U.S. economic conditions over the next five years”. This component dropped by 12 points.
According to the report, nearly three out of five (59%) of people 55 and older; and the majority (56%) of college graduates were among those who are increasingly pessimistic about the future economy. The researchers did offer some possible explanation for the gap between the view of the present economic situation and the future.
“A plausible explanation can be that Hispanics see the pace of growth in the country as sluggish and they don’t anticipate the same rapid growth in the economy as happened last year,” said Monica Escaleras, director of BEPI.
And the news wasn’t all bad. One group bucking the trend this month of poor future economic outlooks is Hispanic males, 50.3 percent of whom are optimistic about economic conditions in the country over the next five years, up three points from April. Similarly, a majority of Hispanics (52%) think it’s a good time to buy a home. However, the same percentage of people (52 percent) said an increase in interest rates would discourage them from doing so.
The researchers didn’t release their numbers on the national consumer sentiment yet, but based on results from the past few months, the national index should around the same spot on the index. It will be interesting to see what the national numbers did, because it from January 2015 until April 2015, the Hispanic Consumer Index was higher than the national average.
Applications of this Research
Knowing how the Consumer Sentiment Index varies based on ethnicity is more than just an exercising segmenting data. Better understanding the feelings and concerns of a target demographic helps business owners, marketers and others create messages and programs that resonate with members of that demographic.
Knowing that Hispanic consumers have concerns about the future can help business owners and marketers create ad messages that speak to that concern. This can be done by advertising specials for big ticket items in the current market, to get people to buy before they think they won’t be able to afford it. Or, financial service providers can use this sentiment to encourage more savings or investments.
The data on how Hispanics felt about the housing market is also interesting. In the press release, the study’s authors noted a few of the ways this part of research could be applied.
“Since Hispanics are the largest and fastest growing ethnic minority group in the country their influence on the economy and housing market can be significant,” Escaleras said. “The demand for housing by Hispanics could stimulate business and financial services within the housing market.”
This information can also be very useful to people working on political campaigns. Both the Democrats and the Republicans want the latino vote, and truly understanding the sentiment of the community will do far more than photo ops and learning a few words of Spanish to convince Hispanic voters that a candidate has their best interests in mind. If this data is any indication, Hispanic voters may be more interested in hearing about improving economic opportunities than about shared family values.
Consumer sentiment is a dynamic thing and there’s value in remaining knowledgeable about the things that concern the people in a target demographic. The Business and Economics Polling Initiative (BEPI) at Florida Atlantic University releases data from polls like this often, so if it this kind of data is useful for your business or interests, be sure to check them out.
For more research about consumer attitudes read this article on the national Consumer Confidence Index.