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December’s News on Big Ticket Spending to be Upbeat

Posted November 19, 2009

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Willingness to Spend for Major Goods

Active shopping for major goods – visiting dealers, checking prices – increases by nine points from an Index of 96 in September to 105 in November.

The increase in active shopping for major goods is associated with a 26% increase in the number of consumers with the “Strongest” financial balances.

The increase in active shopping for major goods is logical, in that consumers with the “Strongest” financial balance include a major proportion of consumers who actively shop for cars, housing and other major goods.

NOTE: November is one of several recession months where active shopping for major goods went up even though the financial balances of the average consumer went down. Active shopping went up because there was an increase in the number of consumers with the “Strongest” financial balances. TO READ MORE GO TO: “Recession Tightens For All But Very Rich” and “A Fortunate Few Consumers Continue Active Shopping For Major Goods Despite the Recession”

Consumer Financial Balances Versus Willingness to Spend Freely: September, October, November (1,500 telephone interviews conducted at the rate of approximately 503 a month in the three months ending November 2009)

	Consumer Balance Index
	Sept 2009	Oct 2009	Nov 2009	Diff. Sep-Oct	Diff. Oct-Nov
CONSUMER BALANCE INDEX (CBI)	73	79	78	+6	-1
Active Shopping for Major Goods Index	96	99	105	+3	+6
Percent Actively Shopping For…
New Car	4%	4%	5%	-2	+2
Used Car	9%	7%	9%	-2	+2
House	4%	5%	5%	+1	0
Furniture	9%	10%	11%	+1	+1
Personal Computers	9%	9%	10%	0	+1
Major Appliances	7%	8%	8%	+1	0
New Carpeting	4%	3%	3%	-1	0
Color TV	6%	9%	9%	+3	0
Air Travel	19%	21%	18%	+2	-3
Overnight Hotel/Motel	19%	20%	20%	+1	0

Consumer Financial Balance

The Consumer Balance Index (CBI), which tracks consumer perception of thebalance between their assets and income versus debt and spending obligations, declines by a negligible amount from 79 in October to 78 in November.

Click to see graph

Investor Willingness to Buy Stocks when the Dow Stock Price Index declines by 10%

The ratio of prospective buyers to sellers of stock in the event of a ten percent decline in the Dow changes from fewer than one buyer to each seller in July (0.6 3) to a positive 1.44 buyers for each seller in November.

Click to see graph

COMMENT

A distinction must be made between the Reuter’s consumer sentiment survey and Sage’s survey of consumer perception of their financial balances (CBI).

The Consumer Balance Index (CBI) reflects consumer perception of the balance between their income and assets versus their debt and spending obligations. It is based on their assessment of their own financial situation.

The Reuters University of Michigan index of consumer sentiment reflects not only what consumers themselves observe about the economy but also reflects what they learn from the press.

The November improvement in consumer active shopping for major goods anticipates good news about consumer spending for cars and other major goods showing up in December’s press. It should not be read as contradicting the November downturn in consumer sentiment just announced by Reuter’s University of Michigan survey.

TO ASK QUESTIONS request detailed data, make suggestions or offer your projections of the future, phone Leo J. Shapiro, CEO SAGE: Survival and Growth Enterprises LLC. He can be reached in Tucson at 520-878-0188.