Consumer Confidence May Boost Sales

March 30, 2006 - 17:10

Retailers may have received encouragement last week when a private research group released information saying that consumer confidence is on the rise.

Consumer confidence, a measurement of how consumers feel about their economic future, has reached its highest level since May 2002, according to the Conference Board Consumer Research Center. The group’s consumer index rose to 107.2 in March from 102.7 in February. This suggests consumers believe the economy is gaining steam despite high energy costs and a cooling housing market.

A steady job market may be the cause of the confidence boost, according to the Conference Board Web site. But retailers should not get too comfortable, warns Stan Pohmer, president of Pohmer Consulting Group in Minnetonka, Minn.

“Of late, the consumer confidence level has been up and down like a yo-yo,” Pohmer said. “Although we all look at the higher number as a positive sign, it should still concern a lot of us as retailers as to what the future really holds.”

There is no predicting the future, but if confidence remains high, consumers might be willing to spend a little bit more money, Pohmer said. The horticulture industry benefits when consumers are willing to spend their disposable income on lawn and garden supplies. In tough economic times, that income is spent more on necessities and less on pots and fertilizer.

Retailers may lose ground on some sales, though, as the housing market cool down. Home ownership is a driving force behind the lawn and garden business. When people get settled into a new house, they can start shopping for supplies to landscape their property.

Not only are sales of new homes cooling, but sales of previously owned homes are seeing the same trend. This could mean one of two things for the horticulture industry, Pohmer said.

“Number one, people are staying in their homes for a longer period of time and will invest more money into them,” he said. “They are not just trying to turn the homes to make a profit. The flip side is, if previously owned homes are slowing down, people might not put a lot into it because they don’t think they can get a lot out of it.”

Right now new homeowners look to garden centers when they need landscaping guidance, especially if they are buying a house for the first time. People might spend less money on lawn and garden supplies if the housing market causes their confidence to dip.

But according to the Conference Board’s study, consumers don’t see a dip in the near future. Eighteen percent of the people poled for the study — up from 16.2 percent — expect business conditions to improve in the next six months.

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