By Dr. Alice Kassens

RC Poll: First Quarter Va Consumer Sentiment and Inflation Expectations Report

The Virginia Index of Consumer Sentiment is 93.4, down almost five points since August 2016 (the record high) and two points since last quarter. Sentiment is below the national February value of 96.3. Republicans and Democrats remain divided, particularly about the future health of the economy. The short-term inflation expectation in Virginia is 2.6 percent and is slightly lower than the national value of 2.7 percent.

Figure 1. Virginia Consumer Sentiment values vs. index lifetime average


Black bars are Virginia Index of Consumer Sentiment (VAICS) values; blue line is the VAICS lifetime average. The VAICS began in November 2011.

Virginia sentiment continues slide, but above trend

The Virginia Index of Consumer Sentiment (VAICS) was 93.4 in February, down two points since the last quarter, but above the index average of 85.7. Figure 2 illustrates sentiment values for Virginia and the U.S. over the past two years. Sentiment in Virginia is lower than the national February value of 96.3, which backed slightly off its decade high in January 2017 (98.5). Strong economic indicators support the sentiment values. Virginia unemployment remains low (4.1%). Unemployment dropped 0.1 points in December after increasing each of the previous four months due to people entering the labor force. The labor force continued to expand in December. GDP grew 2.3% (annualized rate) which ranks Virginia 42nd among all states. The largest contributors to the GDP growth in Virginia are the information and finance sectors.

Figure 2. Consumer sentiment over time, Virginia and the United States


U.S. data downloaded from FRED and University of Michigan's Survey of Consumers 2/28/2017; blue line is U.S. Consumer Sentiment (monthly); black line is a three period moving average; red bars are VA Consumer Sentiment

Figure 3 illustrates the three sentiment indexes for the Commonwealth and the nation. Virginians are slightly less optimistic than the nation overall which is driven largely by lagging beliefs about current conditions. The Virginia Index of Current Conditions (VAICC) is 99.9, up slightly from last quarter, but it rose by less than the national value. Sixty percent of those surveyed believe that now is a good time to buy large durable items, primarily due to low prices.

Figure 3. Consumer Indexes February 2017, Virginia and United States


U.S. data from the University of Michigan's Survey of Consumers, February 28, 2017

The Virginia Index of Consumer Expectations (VAICE) was 89.2 in February, down four points since last quarter. The national February 2017 measure of expectations is 86.5 indicating that Virginians remain more optimistic about the future of the economy than the nation as a whole. More respondents believe that the overall economy will prosper over the next five years (44.2%) than believe it will contract (25.1%). Thirty-five percent expect their household finances to improve in the coming year, while 11 percent anticipate their personal finances to decline. Improved wages and income are likely the foundation of the optimism.

Parties split on economic expectations

Dramatic differences persist by party, particularly pertaining to expectations. The VAICE for Republicans is 125.5, compared with 61.6 for Democrats, a 64-point difference. Republicans first became more optimistic about the economy after the November 2016 election. Independents provide some balance with a VAICE of 87.1. Figure 4 shows shares of positive and negative responses to questions about the economy by party. Democrats show the least pessimism about their personal finances, with the majority expecting no change. Their greatest concern pertains to business conditions. Republicans, likely spurred by potential tax cuts, are optimistic about their personal finances, business conditions, and the economy as a whole.

Figure 4. Economic expectations by party


Regional Sentiment Strong Across the Commonwealth

Consumer sentiment for each of six regions in the Commonwealth are shown in Figure 5. Comparing regional index values over time is problematic due to the small sample size within each region. Figure 5 shows the average regional value of the VAICS (November 2011-February 2017, red dot), the typical variation from that average (black line), and the current value (blue dash). This depiction provides a meaningful way to examine the current regional VAICS values to their usual values. In February 2017, Southside and Southwest Virginia show optimism while the remainder of the Commonwealth is as optimistic as in the past.

Figure 5. Regional VAICS Mean and Current Value


Regional VAICS values on the y-axis; mean regional VAICS (red dot), sample standard deviation of regional mean (black line), current regional VAICS (blue dash)

Inflation expectations fall

The short-term inflation expectation, shown in Figure 6, rose to 2.6 percent, up 0.4 points since last quarter, but below the national expectation of 2.7 percent. The long-term inflation expectation reversed a six-month decline, increasing to 4 percent this quarter in the Commonwealth and well above the national estimate of 2.5 percent. Both short- and long-term inflation expectations are fairly stable over time. Predictable prices are crucial to long-run investment, economic growth, and job creation.

Figure 6. Short- and long-term inflation expectations past two years, Virginia


Short- and long-run price expectations are weighted means.


Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. from February 12 to February 18, 2017. A total of 616 Virginia residents 18 or older were interviewed. Telephone interviews were conducted in English. The random digit dial sample was obtained from Marketing Systems Group and included both Virginia landline and cell phone exchanges so that all cell phone and residential landline telephone numbers, including unlisted numbers from Virginia exchanges, had a known chance of inclusion. Cell phones constituted 39 percent of the completed interviews.

Questions answered by the entire sample of 616 consumers are subject to a sampling error of plus or minus approximately 4 points at the 95 percent level of confidence. This means that in 95 out of 100 samples, like the one used here, the results obtained should be no more than 4 points above or below the figure that would be obtained by interviewing all consumers who have a telephone. Where the results of subgroups are reported, the sampling error is higher. Sampling weights were constructed using Virginia Census 2010 data by age, race and gender groups. Quotas were used to ensure that different regions of the Commonwealth were proportionately represented. The margin of error was not adjusted for design effects due to weighting.

A copy of the questions and all toplines may be found here.

The Roanoke College Poll is funded by Roanoke College as a public service.

For more about the Institute for Public Opinion Research, click here

Contact Name: Dr. Alice Louise Kassens, Senior Analyst, IPOR
Contact Phone: (540) 375-2428 Office, (540) 816-8830 Cell
Contact Email: kassens@roanoke.edu