ACSI: Customer Satisfaction Flattens
Q2 2007: Manufacturing Durables, E-Business

The American Customer Satisfaction Index (ACSI) again shows a flattening of improvement with a marginal increase of only 0.1% to an overall score of 75.3 in the second quarter of 2007.  The index has risen for nine consecutive quarters – the longest period since measurement began in 1994.

As the improvement in customer satisfaction began to level off at the beginning of the year, so too has consumer spending.  Despite an economy that grew at 3.4% during the second quarter, consumer spending was unusually weak, dropping from 3.8% in the first quarter to just 1.3% in the second quarter.  This is much lower than usual and also lower than predicted by overall customer satisfaction.

When consumer spending drops, it often rebounds the next quarter.  Much will depend on the effect of the slumping housing market.  Household savings are low and fell to 0.6% in the second quarter. But the jobless rate is low, corporate profits are healthy, and there has been some income and wage growth as well.  The ACSI forecast of consumer spending growth for the second quarter is in the range of 3.1% to 3.9%. To the extent that the effect of debt service dampens demand, spending growth could be as weak as 2.8%.  If that turns out to be the case, GDP growth would most likely be anemic.