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How the Recent Terrorist Acts Are Affecting Consumer Confidence and the Relationship to the Economy

When factors that can contribute in the recovery and development of an economy are considered, one of the primary aspects to be considered is usually the behavior of the consumers. From the behaviors of the consumers here we mean that what is their perception and attitudes towards the economy.  The measurable factors in this regard are the confidence of an average consumer on the economy and how much they are willing to spend their money for the purchase of goods and services. Following the terrorist attacks in this country, some recent news reports have suggested or implied that the attacks themselves have contributed to a deterioration of consumer confidence. The government is also quite concerned about the decline in consumer confidence and spending.

The recent terrorist attacks on the heart of America have shocked the whole world. These attacks made a very negative impact on the minds of the general public. The grief and shock of this act of immorality will remain for years in the hearts of the people. The worst part of this issue is that it brought the economy into a slump. Some industries were very badly and a major downsizing has taken place in reaction to it. The mostly effected industries include the airline and tourism industries.

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The retail industry is also very badly affected as the confidence of the general consumer on the economy has shaken and the consumer spending has dampened. An individual will now usually avoid going to shopping malls and other busy places for a considerable span of time. The reason for this lesser interest of a consumer is that consumers are very cautious about uncertainty and confusion in the market and if there is any sort of confusion they will avoid spending money. It is hopefully believed that consumers will be still spending money on basic needs but they will avoid making a big purchase decision like buying a car, planning a holiday, purchasing furniture etc. Among the many affected industries, the insurance companies are on the top of the list, which have to pay claims in the billions of dollars and this loss is going to affect the consumer confidence and business spending. The troubled labor market and a weakening economy have forced the consumer to be cautious about his/her spending. This record low spending rate has threatened the stability and future growth of the retail industry. It should be kept in mind that, the retail industry was one of the few industries that were less affected from the already troubled economy of the United States. A New York based business Research Company named The Conference Board has revealed that their studies have shown a fall in the monthly consumer-spending index from already low 114.0 in August to 97.6 in September. (Consumer Confidence)

As the economic ramifications of September 11 continue to reverberate in the coming weeks and months, and the number of layoffs continue to rise, the economy faces tougher times ahead,' said Lynn Franco, director of the Conference Board's Consumer Research Center, in a statement. 'While consumers have managed to keep the US out of a recession for several years now, which soon may no longer be the case.' (Consumer Confidence 1)

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In the face of rising unemployment, the situation of the job market is expected to remain uncertain. Most of the consumers are feeling insecure about their jobs and this is resulting in the form of lesser spending.

The recent attacks have brought a significant level of emotional disturbances among the general American public. This disturbance is very much obvious among the majority of Americans who have accepted to feel depressed because of the attacks, have felt fearful and insecure, have came more close to their loved ones. The attacks have raised serious concern about their own life security and have dropped the confidence of a common American citizen on the government’s security measure. Even thought these concerns have lessened after two to three weeks of the attack and the way government has responded but there is still fear among the Americans concerning the security of their own lives. The terrorist attacks have drastically shaken the confidence of the general consumers on air travel. Most of the people are now not likely to consider a safer and reliable mode of traveling.  

One thing should be made clear that the general public's opinion about the economy and their personal financial situations was going negative rapidly in the months, and even in the last week, before the terrorist attacks of September 11. Noting down these fact economists and other industry experts are now questioning that whether the terrorist attacks will further facilitate the decreasing trend of consumer confidence and spending. A number of surveys conducted in recent days have considered the results related to consumer and investor confidence in the period before the attacks as well as the confidence level after the attacks. These surveys have revealed that consumer confidence has not only dropped after the attack but it was experiencing a decreasing trend in the month of August as well as in early days of September before the attack. Surprisingly, some of the surveys have shown that consumer confidence has risen immediately after the attacks and some have shown that the trend of decrease in consumer confidence after the attacks was the same as it was before the attacks.

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The situation of chaos and shock created because of the terrorist attacks has significantly affected the personal life of a common man. Though, the severity of the situation is not up to that level as it was in the first few weeks of the attacks but still a common American consumer is cautious and hesitant to make any big purchase decision because of the uncertainty in the economy caused by the attacks. The reason for this uncertainty is the fear of another attack and hence a huge slump in the American economy. However, the measures taken by the U.S government in reaction to the attacks have helped to restore the consumer confidence, not completely, but to a considerable extent. All of these disturbances have created major crisis for many industries among which the airline industry is at the top as discussed above. Along with the airline industry some other related industries have also suffered. Some states are expecting a significant drop in their incomes because of the crisis. For example, the hotel and tourism industry was the next one to suffer, as the number of visitors from outside the United States will obviously drop because of strict visa policies that are going to be imposed by the government. Moreover, number of visitors from within the United States will also decrease because of the fear and uncertainty created in air travel and decrease in the feeling of security among the general public. Other businesses are also not safe from these crises, as they have suffered losses in the period right after the attacks. Due to this recent decline most of the industries are considering some major job cuts. The airline industry has already gone through a major layoff and a number of airlines have reduced their staff to a substantial level. An average American consumer has become extremely precautious due to the job insecurity caused in the economy. People now prefer to save for the future perceiving a major slowdown of the economy, rather than to spend their money on things they consider less important. They are spending less money on their entertainments, purchase decision to buy any luxurious item such as a new car and other things, which they consider to be less important for meeting their day-to-day needs.  

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Predictions about the confidence and perception of an average consumer, about the economy, should be made with extra caution. Though it is some thing commonsensical to expect a drop in consumer confidence and spending in reaction to the recent terrorism encounter but certain surveys are telling somewhat a different story.  Surveys and researches are a more reliable tool to find out the behavior of a consumer in reaction to any sort of change in the economic conditions. It has been pointed out by some studies that the drop in the consumer confidence was not immediate after the attack and that the terrorist attacks cannot be the only reason for drop in consumer spending.  Measures exist to provide a quantitative tool for evaluating attitudes such as consumer confidence, and for now these measures are telling us that consumers’ economic and financial perceptions did not collapse immediately following the terrorist attacks.

Works Cited

Consumer confidence plummeted in October: MSNBC: from the World Wide Web: www.msn.com
Public Confidence in Economy Falls: from the World Wide Web: http://www.gallup.com/poll/releases/pr011031d.asp 

Terrorist Attacks and Consumer Confidence: From the World Wide Web: http://www.gallup.com/poll/releases/pr011002.asp
 
 


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