Arkansas’ optimism about economy lags in sentiment survey

Arkansas’ consumer sentiment index has dropped slightly since March, according to the fall survey released Tuesday.

The index was 77.8 in September, a decline from 79.1 in March, the Arvest Consumer Sentiment Survey indicated. Arkansas was the only state of the three surveyed to show a decline. Missouri’s consumer sentiment was 85.8 in September, up from 85.2 in March. Oklahoma’s was 85.0, up from 84.8.

The regional average for the three states was 82.6.

The index is based on methodology developed by the University of Michigan, which includes five questions that evaluate consumer perceptions about finances, business conditions, plans to purchase major household items, level of consumer debt, and current and planned savings.

Four hundred randomly chosen Arkansans are interviewed twice a year, along with 400 Oklahoma residents and 400 Missouri residents, in the regional survey.

The decline in the index for Arkansas in September is consistent with what is happening nationally, said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas in Fayetteville and the lead economist for the survey.

There was also a decline in a national consumer sentiment from March to September, according to a survey by the University of Michigan.

“But it is inconsistent with the improvements we have

been seeing in employment, housing prices and housing sales,” Deck said at the Arvest Economic Forum in North Little Rock.

Arkansas has seen a steady decline in its unemployment rate in recent months, and housing sales and prices have improved this year.

The most important indicator in consumer sentiment for an individuals’ perception of the economy is income and perceived future income, Deck

said.

“I think consumers are seeing — correctly — that there is not a lot of [ pressure for increased wages] out there,” Deck said.

Arkansas may have had a larger decline if not for low gasoline prices, a drop in the unemployment rate and slowly rising incomes, Deck said.

The decline in sentiment since March was broad- based, occurring for both families with incomes above and below $ 75,000, Deck said.

“In short, good local macroeconomic news does not seem to be positively affecting

individual perceptions about their own situations,” Deck said.

One statistic indicates there could be a slowdown in the future in the Arkansas economy, said Marc Fusaro, an associate professor of economics at Arkansas Tech University.

Through September this year, construction permits in the 18 Arkansas cities that provide data for the Arkansas Tech Business Index showed a drop of 34 percent compared with the same period in 2014.

Permits for commercial construction have declined

this year compared with last year, Fusaro said.

“There has been a real slowdown in commercial construction permits,” Fusaro said. “This is troubling because it is a leading indicator of what’s going to be happening in the near future.”

Fusaro said he is worried about what the decline in permits means for 2016.

“What we’re going to see is a slowdown in construction employment,” Fusaro said. “And you’re not going to have new businesses opening up because they’re not building the new businesses.”