Consumers' Perception of the Economy Remains Negative; Businesses Slightly More Upbeat, but Indicate Job Cuts Will Continue

NEW YORK, Jan. 15 /PRNewswire/ -- The latest information from two of TNS' banking research studies show consumer perceptions of the U.S. economy remain predominantly negative.  According to the studies, consumer perception of the economy is virtually unchanged since September, with 64% holding a negative position.  But while consumer perception remains low, business executives, with revenues between $3MM and $2B, are slightly more optimistic.

After feeling slightly more positive about the near term prospects for the economy in September, consumers' outlook shifted in a more negative direction in December. According to the study, a vast majority of consumers (66%) strongly anticipate that they will be cutting their personal spending over the next six months. "Consumers have become anxious about the high rate of unemployment, rising interest rates, the possibility of price inflation, more foreclosures, and flat or even wage deflation," said Glenn Staada, Vice President of TNS, "We're seeing that consumers are more often negative, not positive, about their personal situation and components of the economy in the coming months."  

While executives are more likely than consumers to say the economy will improve in coming months, the credit situation has nearly all still in cost cutting mode.  95% of businesses will continue to aggressively seek ways to cut costs in the next six months, with 52% saying this includes labor costs.  

Despite their optimism, executives are resigned to the opinion that the unemployment picture in the U.S. will get worse before it gets better.

The Credit Crunch and Small Business

Amid the widespread crisis of this past year, even healthy small businesses felt the squeeze and some are still feeling it. The demand for fresh credit is great, yet the current credit shortage continues to exacerbate cash shortfalls for businesses, causing nearly all to remain in cost cutting mode well into 2010. Thirty-four percent (34%) of small businesses are anticipating that they will have trouble accessing the credit they need.  "With credit not flowing, businesses continue to struggle with a diminished cash position and have concerns about their ability to acquire the credit necessary to bridge the gap," Staada added. "With consumers and businesses hunkering down, sensitivity to rates, fees, and other pricing issues will remain a top issue for bankers in 2010."

The impact of the credit crisis proves to be a significant pull on job creation during the economic recovery.  This was reinforced last Friday when the U.S. government reported that U.S. employers unexpectedly cut 85,000 jobs in December, cooling optimism on the labor market's recovery. Furthermore there doesn't appear to be an end to labor cuts, especially among smaller businesses.

The Impact of TARP and What Lies Ahead

Consumer attitudes have not changed since June of 2009 when 59% felt negatively toward government bailout of large corporations, though most agree, the stress tests for Financial Services firms, credit card regulations, and limits on executive compensation have been favorable to long term stability.  

While still not well-received, TARP is now less likely to create negative impressions of banks associated with the program than it was in Feb '09.  

The percentage of businesses that feel TARP helped to stabilize the crisis increased from 5% in Feb '09 to 22% in Dec '09.  However, only 6% say that TARP takers are providing easier access to credit and 55% feel that the banks have used TARP funds for purposes other than to provide credit to consumers and businesses.  Staada went on to add, "The government programs helped keep the economy together and promoted the beginning of a recovery, so there isn't this negative stigma to them now as when they first were introduced. However, the banks aren't out of the woods yet. Most businesses feel that banks have used taxpayer money for purposes other than unfreezing credit.  Given this finding, big bonuses at a time where credit is still not flowing to small businesses will continue to drive negative sentiment, especially towards the largest banks."

Bank Image Issues

The media continues to fuel negative sentiment towards banks, with 43% of consumers and 50% of business executives saying a recent news story has left them with a negative impression of a bank or banking, in general.  And, business clients of the Top 5 largest banks in the country are most likely to be left with a negative impression, at 58%  "Multi-regionals and smaller banks have a PR advantage currently." concluded Staada. "These banks should be looking to exploit this advantage. The top 5 banks need to demonstrate the ability to provide the levels of stability, credit, and service currently associated with smaller banks, but powered by the breadth of solutions, ability to customize, and scale of resources that only a large bank can maintain."

About the Studies

The consumer findings are based on TNS Market Effectiveness in U.S. Consumer Banking research program, which is a multi-client research offering that is based on over 4,000 interviews among a nationally representative sample of American banking consumers. The research diagnoses performance across the customer experience, brand health and reputation, and marketing communications.  Findings cited in this release are based on interviews conducted in June, September, and December 2009.  Each field period returned over 1,000 completed interviews.

The business executive findings are based on the Commercial Banking Momentum Monitor (CBMM).  This program is an ongoing, dynamic research study of mid-sized companies (U.S. based Middle Market companies with revenues $3MM-$2B) across a variety of sectors. TNS is undertaking this program on behalf of major US financial institutions. The program explores a wide range of topics of concern to company financial decision-makers.

The Bank Advisory Board is a select online community of company financial decision makers managed and operated by TNS as part of the CBMM program.  Membership is by invitation only.  The two surveys used for this release were fielded in February and December 2009.  Interview counts were 486 and 190, respectively.

About TNS

TNS, who recently merged with Research International, is the world's largest custom research agency delivering actionable insights and research-based business advice to its clients so they can make more effective business decisions.  TNS offers comprehensive industry knowledge within the Consumer, Technology, Finance, Automotive and Political & Social sectors, supported by a unique product offering that stretches across the entire range of marketing and business issues, specializing in product development & innovation, brand & communication, stakeholder management, retail & shopper, and qualitative research. Delivering best-in-class service across more than 75 countries, TNS is part of Kantar, the world's largest research, insight and consultancy network. Please visit www.tns-global.com for more information.

The Kantar Group

The Kantar Group is one of the world's largest research, insight and consultancy networks. By uniting the diverse talents of more than 20 specialist companies – including the recently-acquired TNS – the group aims to become the pre-eminent provider of compelling and actionable insights for the global business community. Its 26,500 employees work across 80 countries and across the whole spectrum of research and consultancy disciplines, enabling the group to offer clients business insights at each and every point of the consumer cycle. The group's services are employed by over half of the Fortune Top 500 companies.  The Kantar Group is a wholly-owned subsidiary of WPP Group plc. For further information, please visit www.kantargrouptns.com

SOURCE TNS

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