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Virginia Consumer Sentiment Hits Record Low, Fueled by Rising Prices

The Virginia Index of Consumer Sentiment (VAICS) continued to slide downward, hitting a series low and falling below 70 for the first time. This quarter’s index value is 69.6, almost three points below the third-quarter reading. Concerns about the current economy continue to drive the losses, primarily rising prices.

Consumer sentiment fell 2.8 points over the first quarter of 2022 to 69.6, a series low. Since the start of the pandemic, the index lost almost 30 points. Nationally, the January unemployment rate was 4.0%; the rate in Virginia is 3.2%, down nearly two and a half points over the last 12 months and well below the pandemic highs. Concerns about rising prices and reduced purchasing power drown out the good news about the rapidly recovering labor market and economy.

Respondents from the Commonwealth remain more concerned about the current economy as measured by the Virginia Index of Current Conditions (ICC). In February, the VA ICC is 65.0, almost 3.5 points below the national number and down a point since the last quarter in Virginia. Close to 29% of respondents say that their household finances are better than a year ago. In comparison, almost 33% say they are worse off, the latter seven points below last quarter indicating relative improvements in household finances. Over 55% of respondents believe that business conditions are worse today than a year ago, which is a majority, but five points lower than last quarter.

Although sentiment is low in the Commonwealth, there is considerable optimism about the future relative to the current conditions. The Virginia Index of Consumer Expectations (ICE) is 72.6, which is 15 points above the national number. Both the national and state indexes fell since last quarter, but the slide in Virginia was more moderate. About 35% of respondents believe that the coming few years will witness an improved economy, down almost 10 points since last quarter.

Virginians anticipate increasing overall prices in 2022 and beyond, although the degree of concern continues to diminish. Both the short- and long-term price expectations remain slightly above historical averages in Virginia. Individual beliefs about prices are heavily influenced by what one regularly sees (ex. fuel and food prices). Supply chain issues and labor shortages contribute to rising prices and fueling respondents’ concerns.

Analysis

“Consumer sentiment in the Commonwealth fell to a series low to kick off 2022, primarily fueled by concerns over rising prices,” says Dr. Alice Louise Kassens, John S. Shannon Professor of Economics and Senior Analyst at the Roanoke College Institute for Policy and Opinion Research. “The economy continues to strengthen, with the state unemployment rate dropping to 3.2% in December. Unfortunately, concerns about rising prices are overwhelming the economy’s positive aspects. Labor shortages and turnover plague business owners. Markets should continue to work out supply chain issues, and prices should eventually return to normal levels, but with the size of the global economy, that will take some time. Although we seem to be on the right side of Omicron, COVID continues to dampen consumer spirits.”

Methodology

Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Virginia, between Feb. 7 and Feb. 16, 2022.

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