Friday, May. 16, 2008

Consumer confidence at 15-year low in Johnson County

Johnson County consumers are guarding their pocketbooks closer than anytime in almost 15 years.

That’s according to the county’s Consumer Confidence Survey, which determined consumers were less confident in April than in any month since August 1993, a few months after the survey was created. Doug Davidson is the president of the Johnson County Economic Research Institute, or CERI, the organization that conducts the survey.

“Obviously there’s a consumer conscience about economics,” Davidson said. “Typically, consumer confidence translates into willingness to spend and how freely (consumers) will spend, especially in retail.”

Davidson said that when confidence is low, consumers are less likely to spend their money on discretionary purchases.

In this instance, he said, the county was following the national trend. In fact, the county’s confidence numbers have tracked particularly close to the national numbers for the last few years, something that hasn’t always been the case, he said. Still, consumers in the county are considerably more confident than the rest of the country as a whole.

The confidence rating is based on responses to a five-question survey, the results of which are compared with the results from the initial survey in 1993. For example, if the results matched equally to the original responses, the rating would be 100. The March rating of 97.6 was the first time below 100 for as long as Davidson could remember. Johnson County usually averages around the mid-120s.

By comparison, the national rating for March was 66. The nation fluctuates more than the county, but the mid-60 rating was extremely low. Last year’s rating at that time was above 100.

Davidson said the county fares better than the national numbers because the average county resident is in a better situation financially than the average American.

The amount of growth in the county has been steady for a long time, but as the county’s development becomes larger, growth has less of an effect on the economy.

“When that slows down, as it has in housing, we do feel national trends more than we used to,” Davidson said. “When we were smaller, growth could and would carry us through those times.”

He said commercial development in the county is still healthy. Johnson County has seen a housing slowdown, but like many things, not to the same degree as other places. That’s true not only in Johnson County, Davidson said, but throughout most of the metro area. That’s true for a number of reasons. The economy is diversified enough that it offers a wide variety of services to consumers.

“We don’t have boom cycles here, where the economy gets ahead of itself so that when it pulls back, it pulls back hard,” Davidson said. “We still see that, but not like you’ll see it on the East Coast, say.”

Two other groups administer consumer-confidence surveys and release the results nationally. The Conference Board and the Consumer Sentiment Index are national polls that measure similar numbers.

“It’s our size, not our growth that’s causing this,” he said.

CERI is a small, nonprofit organization that has a staff of Davidson and three others. It was created in 1986 as a county entity but became a nonprofit in 1992. Its survey mirrors the Conference Board survey.

“Our mission is to support development in Johnson County through research and data,” he said. “We provide data to small businesses to give them an indicator.”

Some of that data includes demographics and a “trade area profile,” which estimates the demographics within the county.

One measure of consumer confidence used in the Conference Board’s survey is intention to travel in the next six months. In that survey, the board reported that respondents intending to travel in the next six months hit a 30-year low.

Locally, those effects aren’t being felt as much.

John Craig, owner of Pathfinding Travel & Cruises at 2111 E. 151st St., said he hasn’t seen a dropoff yet. As a small-business owner, though, he’s always looking for the next dip in the economy.

“Sure it’s going to have an effect, there’s no doubt about that,” Craig said. “Anytime there’s a downslide to the economy, it’s going to be something that reaches small businesses.”

Craig said consumers are more cautious now than they would be in a time of economic affluence, but he hasn’t been as hard-hit as a travel agency on either coast may have been. The major change Craig sees isn’t customers canceling trips or failing to plan trips in general — it’s scaling back those trips to make them more manageable. So while the same number of trips are being planned, they’re being planned for five days instead of 10 days and weekend getaways instead of major trips. There’s a positive and a negative to that, and Craig said his business has been able to stay in front of the wave in providing a more reliable option than do-it-yourself online booking sites.

“People want me to spend their money wisely for transportation,” he said. “As an agent, that’s what I’m going to do.”

Tim McKee, vice president of economic development for the Olathe Chamber of Commerce, said the survey was an indication that national trends were having an effect on Olathe’s businesses.

The two main offenders, McKee said, were high gas prices and the housing slowdown. He said the housing market was hurting more than anytime he’s seen in the last 10 years.

He said that the number of single-family housing permits in 1998 was at 1,800, and that Olathe would be lucky to do 600 this year.

“So much depends on the housing-construction market beyond just the main contractor,” McKee said. “There’s concrete manufacturers, roofers, lots of things to consider. There are lots of small businesses dependent on that, and it’s negatively affecting them.”

The cost of fuel has driven up construction costs, plastics and other necessities as well.

“We’re seeing some downturn and effects, but I think the positive thing is we’re not seeing the booms or the busts,” he said. “We’re fairly steady and still growing. Not at quite the same pace we were, but we’re still seeing growth.”

One of McKee’s main concerns is that as the county develops further and Olathe grows, if the sales tax drops, the county still has the same infrastructure costs.

The number of single-family building permits from January to March 2007, which was a down year, still hit 172. During that same period this year, there have been only 101 permits, a 41 percent decrease.

Those numbers are similar to other counties in the metro area, but Johnson County has been lucky thus far not to absorb the worst of the worst.

“The good thing, if there is a good thing, is that we’re not alone,” McKee said. “This is not unique to Olathe or Johnson County; it’s national.”

McKee said Olathe is also not seeing expansion of small businesses the way they had been before the slowdown — a troubling sight given that those businesses were still expanding even after Sept. 11 and one of the worst economic slowdowns in modern American history. McKee said that while it was important to see that the small businesses have been affected, they’re traditionally also the first to come out of a slowdown.

“If the small businesses stay slow and the big businesses start to suffer, then we’ll be in a large problem,” McKee said. “Then it’s time to worry.”

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