We put together the two charts below that outline consumer confidence levels at various income levels. As might be expected, those that make more money generally have higher confidence based on this measure. From mid-2006 to mid-2007, those that made more than $50,000 per annum had almost twice the confidence of those that made less than $15,000 per annum. Beginning in mid-2007, this confidence gap began to narrow as the group that was making the most money saw a marked fall in their confidence level.
In Q4 of 2008 and Q1 2009, the confidence delta between the income groups narrowed to a point where confidence levels of the those making the least, or under $15,000, and those making the most, or over $50,000, was basically flat. That is, there was no difference in confidence levels between these disparate income groups. Since March we have seen confidence rebound sharply, albeit off of low levels, and have also seen the delta between high earners and low earners widen once again. The most obvious interpretation is that those who make more money also have a large amount of their assets invested in the stock market, so as these market related investments decline, so too will their confidence, while the inverse is true, so as the stock market rebounds, as we have seen since March, the higher income earners should see a disproportionate rise in confidence.
For those that play the consumer stocks, being aware of this widening spread, as it sustains itself, will be a key driver of consumer spending patterns in the coming quarters. As always, let us know if we can put you in touch with our consumer research teams (McGough, Penney, and Jordan) to take advantage of this trend on a stock specific basis.
Daryl G. Jones