Alaska consumer confidence falls to a five-year low

Alaska consumer confidence fell to a five-year low in the first quarter of 2016 as the state continued to grapple with a weak oil sector, budget cuts and doubt about whether lawmakers can avert a fiscal crisis.

Consumer optimism has fallen every quarter since the second half of 2014, according to a new report by Anchorage consulting firm Northern Economics and Alaska Survey Research. Oil prices began their precipitous drop in June of that year and have come nowhere close to recovering.

"People show the most concern about the thing over which they have the least control -- the state economy," said Jonathan King, vice president of Northern Economics. "There's a lot of uncertainty. Are they planning for Armageddon or another $1,000 a year in taxes?"

Respondents were more upbeat about their own household finances. Fifty-five percent felt secure about their financial situations, while 20 percent did not feel secure. And 21 percent thought their personal finances would improve, while 15 percent thought they were getting worse.

Will widespread doubt about the greater economy lead to a collective tightening of purse strings? Or will the relatively brighter perceptions of personal finances continue to buoy consumption? Those are important questions because spending, on anything from homes to pizza to gasoline, has a huge effect on the health of Alaska's economy.

And unfortunately there's no clear answer. The federal government tracks personal spending on a national level, but only has state-by-state data available through 2014. The absence of a sales tax means Alaska cannot track consumer spending as closely as other states do. There's also uncertainty about how closely consumer confidence tracks actual spending.

"The survey tells you there is anxiety, but it doesn't tell you necessarily about spending," said Mouhcine Guettabi, assistant professor of economics at the University of Alaska Anchorage's Institute for Social and Economic Research. "If you speak to people in oil and gas, they are feeling the pain. If you talk to people who are more removed, they are not feeling it. I don't think of consumer confidence surveys as informative of future spending patterns."


Better metrics might include sales of high-ticket items that require longer-term financial stability to buy, he said. Think sales of homes, cars and boats.

If anything, the confidence survey could be a reflection of people's faith in the Legislature's ability to avoid more multibillion-dollar deficits.

"This is not a prediction of what's to come. It's a snapshot in time. You never do know," said Ivan Moore, president of Alaska Survey Research. "The next survey comes out in June. Maybe by then the Legislature will have sorted themselves out and people's confidence will have returned."

Moore found that longtime Alaskans -- those who have lived here 30 years or more -- are particularly pessimistic about state, local and personal economics. Higher-income respondents tend to be more worried about the state economy than those in lower-income brackets. Whites are more pessimistic than nonwhites about the present and future of the local and state economies. Young people and singles are the most optimistic overall.

Anchorage consumer optimism also hit its lowest point since the survey began in 2010. As at the statewide level, feelings about the state and city economy were down, while people's opinions about their personal finances were rosier.

The flat job market in Anchorage is one reason residents still feel relatively good about their financial situations, said Anchorage Economic Development Corp. President Bill Popp. While the oil industry has announced large layoffs, hiring in other sectors like retail and health care have somewhat offset those losses, according to data for the first quarter of 2016 from the state labor department. And although state employment was down, federal and local government jobs increased during that same period.

"Anchorage is one of the most robust economies in the state," Popp said. "But when you look at the statewide numbers, they're reflective of lots of uncertainty out there. Cuts have begun in the oil patch. The state fiscal crisis is sucking a lot of air out of the room because there's no clear plan from the government in terms of taxes, the Permanent Fund, government services and the like. It leaves people uncertain about the future and I think that's reflected in the numbers."

Separately, a new poll commissioned by Alaska Dispatch News suggests more people than average could leave the state in the next year. Typically 5 percent to 7 percent of people move out of Alaska annually and are replaced by a roughly equal number of new or returning residents, said state demographer Eddie Hunsinger. The poll by Alaska Survey Research found about 7 percent of the 749 respondents are very or somewhat likely to leave Alaska because of state budget issues, with another 12 percent leaning toward leaving for other reasons.

The poll also found about 5 percent of the 465 respondents who own homes are very or somewhat likely to try to sell their homes in the next year based on the state's budget issues.

But whether people will follow through on their stated intentions is an open question.

"We say one thing and behave another way," said state labor economist Neal Fried. "I don't think that's terribly unusual."

Consumer confidence is influenced by many factors, including personal experience, politics or what people read or see on the news. Guettabi worries talk of a recession will actually play a part in making the economy worse by causing people and businesses to spend and invest more conservatively based on fear rather than economic realities.

"I struggle a little bit with the continual drumbeat of impending recession and the effects on the economy," he said. "The concern I've had is that there are sectors of the economy that are inevitably going to go through pain. Some belt-tightening and cutbacks may happen that are not based on fundamentals."

Jeannette Lee Falsey

Jeannette Lee Falsey is a former reporter for Alaska Dispatch News. She left the ADN in 2017.