|
U.S. Consumers` Confidence Shaken by Financial Upheaval Recent Market Uncertainties, Real Estate, and the Mortgage Lending Meltdown Are Likely to Keep Consumers on Edge Directly Impacting Several U.S. Industries
IBISWorld, Inc. http://www.ibisworld.com/, recognized as one of the nation`s most respected independent publishers of business intelligence research, today released a Special Report detailing which U.S. industries are most vulnerable to an ongoing erosion in consumer confidence in the foreseeable future.
According to today`s IBISWorld special report, the stock market`s recent volatility was induced by the meltdown of the residential mortgage lending market, coupled by home price depreciation in some key markets. "Both have taken its toll on consumer confidence in real estate, one of the most significant indicators of strength or weakness in the U.S. economy," said Rick Buczynski, Ph.D., senior vice president and chief economist, IBISWorld. "In mid-August, the well respected University of Michigan consumer sentiment preliminary index slipped to 83.3 from 90.4 in July - a fall of 7.9 percent." This is illustrated in the following graph: Following months of sub-prime mortgage lenders shuttering their operations, a sharp decline in home prices in some key markets around the country, along with a dramatic increase in the number of foreclosures nationwide, the only recent bright news in the mortgage industry came last week when Countrywide, the nation`s largest mortgage originator, announced with Bank of America, the nation`s largest retail bank, plans for Bank of America to acquire a $2 billion stake in Countrywide. While Bank of America saw the alliance with Countrywide as an opportunity to continue doing what it does best in meeting the needs of its retail savings and consumer account holders, the $2 billion deal with Countrywide provided an immediate solution to the cash crunch that threatened it`s lead in the mortgage origination business, a business Bank of American until now has struggled to grow in competition with Washington Mutual, Wells Fargo, Countrywide, and Indymac Bank, among others.
"While $2 billion dollars is a drop in the bucket from a credit risk perspective," said Dr. Buczynski. "It is a huge signal of confidence for consumers and Wall Street lenders. In the days leading to the Bank of American and Countrywide alliance, Countrywide was loosing depositors and their loan origination business was grinding to a halt."
"Ironically, the Conference Board`s consumer confidence index released on July 31, before the financial calamity, hit a six-year high. The pervasive expectation now is that the Conference Board`s consumer confidence index will probably move in lock-step with the Michigan Index when their survey results are released today." In analyzing the potential impact of a persistent erosion of consumer confidence on industry performance, IBISWorld derives its conclusions using the following criteria: -- What industries will be hit the quickest, and hardest, should consumer
confidence wane, for any reason, through 2008? -- Are there secondary ripple effects that need to be considered? -- The methodology employed utilizes IBISWorld`s Industry Risk Rating
Model(TM) which rates more than 700 U.S. industries on a very low to
very high (1 - 9) scale. The model is commercially available.
Statistical tests have validated a strong correlation between
IBISWorld`s risk scores and both industry profits and probability of
defaults within an industry. According to Dr. Buczynski, in the special report released today, IBISWorld`s analysis assumed that the University of Michigan`s Consumer Sentiment Index will drop six percent on average in 2008 in comparison to IBISWorld`s baseline forecast. This is reflected in the "alternative" assumptions indicated below: IBISWorld`s Special Report included a ranking of the Top 40 Most Vulnerable Industries to a drop in consumer confidence as shown below: RANK NAICS INDUSTRIES MOST VULVERABLE TO A DROP IN VULNERABILITY
CODE CONSUMER CONFIDENCE INDEX
1 48422 Specialized Freight (except Used Goods) Trucking, Local 100.0
2 33637 Motor Vehicle Metal Stamping 89.9
3 33611 Automobile and Light Duty Motor Vehicle Manufacturing 78.5
4 42299 Other Miscellaneous Nondurable Goods Wholesalers 60.0
5 44221 Floor Covering Stores 60.0
6 44819 Other Clothing Stores 60.0
7 44313 Camera and Photographic Supplies Stores 60.0
8 33241 Power Boiler and Heat Exchanger Manufacturing 51.4
9 33121 Iron and Steel Pipe and Tube Manufacturing from
Purchased Steel 51.4
10 33291 Metal Valve Manufacturing 51.4
11 33122 Rolling and Drawing of Purchased Steel 51.4
12 33313 Mining and Oil and Gas Field Machinery Manufacturing 51.4
13 44811 Men`s Clothing Stores 50.0
14 56151 Travel Agencies 50.0
15 44311 Appliance, Television and Other Electronics Stores 50.0
16 44814 Family Clothing Stores 50.0
17 48421 Used Household and Office Goods Moving 50.0
18 42121 Furniture Wholesalers 50.0
19 44511 Supermarkets and Other Grocery (except Convenience) Stores 50.0
20 44815 Clothing Accessories Stores 50.0
21 45322 Gift, Novelty and Souvenir Stores 50.0
22 45439 Other Direct Selling Establishments 50.0
23 33699 Other Transportation Equipment Manufacturing 40.0
24 42292 Book, Periodical and Newspaper Wholesalers 40.0
25 44529 Other Specialty Food Stores 40.0
26 44619 Other Health and Personal Care Stores 40.0
27 44812 Women`s Clothing Stores 40.0
28 44821 Shoe Stores 40.0
29 45122 Prerecorded Tape, Compact Disc and Record Stores 40.0
30 45399 All Other Miscellaneous Store Retailers 40.0
31 81392 Professional Organizations 40.0
32 33792 Blind and Shade Manufacturing 40.0
33 44122 Motorcycle, Boat and Other Motor Vehicle Dealers 40.0
34 44813 Children`s and Infants` Clothing Stores 40.0
35 45121 Book Stores and News Dealers 40.0
36 45211 Department Stores 40.0
37 45291 Warehouse Clubs and Superstores 40.0
38 49111 Postal Service 40.0
39 81149 Other Personal and Household Goods Repair and Maintenance 40.0
40 81211 Hair, Nail and Skin Care Services 40.0
Source: IBISWorld, Inc.
The 40 industries listed as most vulnerable made the list based on the following assumptions:
-- Since about 70 percent of U.S. GDP can be attributed to consumer
spending, a severe erosion of consumer confidence will obviously
foment a drag on the entire economy. This list singles out the
industries, based on NAICS codes, that are most at risk should a
precipitous decline in confidence transpire.
-- Most industries that reveal clear signs of vulnerability to consumer
confidence are driven by discretionary spending -- or solid B2B links
to industries that are. -- A few industries, those that sell "inferior goods" could reap a
near-term gain, benefiting from deterioration in consumer confidence.
Note: An inferior good is a good that has the property that when a
person`s income increases the demand for the inferior good falls; and
vice versa.
Ripple effects resonate through the economy through supply linkages. For example, in the case of specialized freight trucking, major supplier industries that would be affected include:
-- 33341 -- Ventilation, Heating, Air-Conditioning and Commercial
Refrigeration Equipment Manufacturing [Supplies refrigeration and
climate control equipment used in specialized trailers.]
-- 33612 -- Heavy Duty Truck Manufacturing [Supplies large and heavy duty
trucks to the industry.] -- 33621 -- Motor Vehicle Body and Trailer Manufacturing [Supplies truck
trailers to the industry.] -- 33639 -- Other Motor Vehicle Parts Manufacturing [Supplies truck parts
to the industry.] -- 45431 -- Fuel Dealers [Supplies fuel to the industry.]
Interestingly, a few "inferior" goods industry could benefit from a decline in consumer confidence:
-- 45331 -- Used Merchandise Stores
-- 81141 -- Home and Garden Equipment and Appliance Repair and
Maintenance -- 42193 -- Recyclable Material Wholesalers
These reports, along with 700 other reports are available on the IBISWorld Website: http://www.ibisworld.com/.
[Technical Note: The IBISWorld Consumer Confidence Vulnerably Index is defined as the ratio of the absolute deviation of the industry risk score from the baseline risk score forecast over the standard deviation of risk scores, where the industry at highest vulnerability = 100. Further details are only available to IBISWorld "Enterprise Level" clients by request. Industry Market Research and Risk Rating reports can be found at http://www.ibisworld.com/. For IBISWorld`s Risk Rating Reports, visit http://www.ibisworld.com/riskrating/home.aspx.]
About IBISWorld
Founded in 1972, IBISWorld provides a unique and extensive online portfolio of business research and analysis products designed to serve a range of business, professional service and government organizations. Delivered through enterprise subscriptions, the company publishes in-depth reports on more than 700 industries and offers profiles on more than 8,000 U.S. companies. In addition, the company provides databases of economic analysis, demographic data, and risk assessment reports relevant to virtually every business sector. IBISWorld`s materials are valued for the breadth and depth of the research and analysis covering the entire U.S. economy, incorporating both financial and non-financial information impacting tracked industries and companies. IBISWorld Business Information is well known for its accuracy, consistency and timeliness. This is why almost all online information aggregators seek us out to include our reports as part of their global databases. Current IBISWorld partners include Hoovers, Valuation Resources, Superfactory and American Small Business Development Centers. With U.S headquarters located in Los Angeles, IBISWorld has offices in New York, Melbourne, and Sydney. For more information, visit www.ibisworld.com or call 1-800-330-3772.
Source: IBISWorld, Inc.
CONTACT: Harvey Jones, Senior Vice President of IBISWorld,
+1-310-866-5029, fax, +310-496-1596, harveyj@ibisworld.com; or Todd E.
Appleman, President of The Appleman Group, +1-323-850-7664, fax,
+1-323-850-7663, cell, +1-213-447-7662, tappleman@tag-pr.com, for IBISWorld
Web site: http://www.ibisworld.com/
U.S. Consumers` Confidence Shaken by Financial Upheaval
| 
