Lowe Institute of Political Economy at Claremont McKenna College Unveils the First Los Angeles County Consumer Sentiment Index – Shows Marked Downturn

Fourth quarter 2016 results drop 12 percent versus third quarter 2016

LOS ANGELES–(BUSINESS WIRE)–The first Lowe Institute Los Angeles Consumer Sentiment Index (“Index”)
unveiled today shows a 12 percent decline in the fourth quarter 2016
versus third quarter 2016 results, a period when there was a sharp rise
in consumer sentiment. This is important data as the Index provides
guidance on future consumption activity by Los Angeles area residents,
key to assessing the overall prospects for the local economy.
Consumption accounts for, on average, 70 percent of all U.S. economic
activity and its importance cannot be overstated.

“This is a notable drop in consumer sentiment though it is just for one
quarter. If the first quarter 2017 results also drop then we can view
this as a downward cycle,” noted Marc Weidenmier, Director, Lowe
Institute of Political Economy. “Right now, businesses should be
cautious and take a ‘wait and see’ approach before making major
inventory commitments. For governments relying on sales tax revenue,
it’s not time to redraw the budgets but time to pause and consider the
potential ramifications if we head into a period of decreased
consumption.”

National consumer sentiment has been measured by the University of
Michigan since the 1950s and its predictive abilities have led to this
sentiment series being included in the government’s index of leading
economic indicators. Los Angeles County has a population of more than 10
million and is the third largest metropolitan economy in the world. The
Institute deemed this a region that could benefit from its own consumer
sentiment survey.

“The Index serves as a timely source of information crucial to assessing
the pulse of the local economy but also as an example of how localized
knowledge can be captured and utilized to improve forecasting and
decision making,” said Robert J. Lowe, founder of the Lowe Institute and
Chairman of national real estate company, Lowe. “The fourth quarter
results bear out the need for Los Angeles County data as the national
consumer sentiment survey showed an uptick during this same period.”

Among the factors that can drive differences from the national survey is
Los Angeles’ multicultural and diverse economy that is not reliant on
any one industry, its position as a gateway to the Pacific Rim, and
other business and economic variables that are distinct to the region.
“Another factor in Los Angeles may be the ‘Trump effect’ as the majority
of Los Angeles County is deeply Democratic with policy views that are
opposite those of the new administration,” said Weidenmier. ”The fourth
quarter survey was taken in December, after the election when Los
Angeles area residents were absorbing the news following the surprising
election outcome.”

The decline in Los Angeles consumer sentiment was across all ethnic
groups – African American, Asian, Hispanic, Caucasian and other. The
decline was also consistent across most age groups with the exception of
senior citizen (65+) respondents. There was a significant uptick with
senior citizens and a very small uptick in the 45-54 age category.

The survey also asks for respondent’s employment status and includes
full-time and part-time employed, self-employed, homemaker/domestic
engineer, students and unemployed. There was a significant decline in
consumer sentiment across all six groups. There was a slight uptick in
consumer sentiment among retirees.

About the Survey

The representativeness of the Lowe Institute Los Angeles Consumer
Sentiment Index is ensured by its being constructed from a random sample
of 500 people stratified on the basis of age, gender, ethnicity, income,
and zip code. The survey questions ask respondents seven questions
concerning their current situation, perceived future prospects, and
spending plans. People are asked to assess whether they see their
financial situation getting better or worse over the coming year and how
this is linked to their perception of recent business conditions both in
Los Angeles and in the nation as a whole. They are also asked directly
whether they think their chances of finding a new job are likely to
improve over the coming year and whether they think the next year would
be a good time, or a bad time, to buy a new car. The first quarterly
survey was done in the second quarter of 2015 and has proceeded
quarterly since, providing a baseline of data upon which to build.
Additional information is available at www.laconsumersentiment.com.

About the Lowe Institute

Founded in 1986 by Robert J. Lowe, the Institute offers a variety of
programs to provide learning opportunities for students outside the
classroom including: a faculty-student research program, a public
lecture series and a public policy focus on economic forecasting. The
Institute strives to enhance existing curricula and provide emphasis on
public affairs and the attendant concentration in economics and
government. The mission of the Lowe Institute is to promote
undergraduate education in economics and to enhance the public
visibility of the College and its sister institutions.

Contacts

For the Lowe Institute of Political Economy
Karen Diehl,
310-741-9097
karen@diehlcommunications.com
or
Paulo
Acuna, 310-824-9000
pacuna@olmsteadwilliams.com