Significant Shift in Consumer Psychology.

A new nationwide survey issued by Citibank finds a decline in consumers’ expectations for the economy, even though their assessment of current economic conditions are virtually unchanged since the start of 2011. Three years after the height of the financial crisis, 72 percent of consumers believe the economy still has a way to go to reach bottom and 44 percent feel less financially secure now than they did in 2008. A silver lining to the results is the American public’s self assessment which remains largely unchanged. 60 percent remain somewhat or very optimistic about their own personal economic situation over the next 12 months while 36 percent are somewhat or very pessimistic.

The survey, conducted by Hart Research Associates, found that at the start of 2011, a majority (63 percent) of Americans believed that local business conditions would be improving by the end of the year, but now, with the year more than half over, only a minority (41 percent) expects improvement within the next 12 months.

“These survey results bring into sharp relief the degree to which the confidence of even the most optimistic consumers has been shaken by a tumultuous summer,” said Michelle Peluso, Global Consumer Chief Marketing and Internet Officer, Citi. “Although consumers’ current circumstances remain largely unchanged, expectations that things will improve in the foreseeable future have declined. And yet, consumers remain resilient and hopeful that their personal situations will improve.”

Among the survey’s key findings:

– Outlook for local business declines: Just 41 percent of American consumers expect business conditions to improve in their local area over the next 12 months. This represents a 22 point decline since January 2011 (63 percent) and a 10 point decline since April (51 percent).

– Local economic conditions unchanged: Just 23 percent rate their local economy as excellent or good, while 77 percent rate their local economy as either only fair or poor, nearly identical to levels in January (24 percent excellent/good, 76 percent fair/poor) and April (23 percent excellent/good, 76 percent fair/poor).

– Searching for a bottom: 72 percent of American consumers believe the economic downturn still has a way to go before reaching bottom. This represents a 13 percentage point increase since the start of 2011.

– Labor Day: Just 13 percent of Americans rate employment opportunities in their area as excellent or good; 85 percent rate employment opportunities as only fair or poor in their area, relatively unchanged from previous surveys this year.

– Savings & Debt: Comfort with current level of savings and debt remain mostly unchanged, 46 percent and 61 percent respectively.

Citibank Economic Pulse Declines

The Citibank Economic Pulse, a quarterly measure of public attitudes toward the economy, dropped 5 points to minus 17, the lowest level in the Pulse’s two year history. Most of the decline in the Pulse which combines eight survey questions into a single measure, is seen among college educated and upper income Americans who held more optimistic views of the future in January but have now lowered expectations to levels more in line with other Americans. The most affluent group, those earning over $150,000 in household income, dropped 8 points to +4 while college educated Americans dropped 9 points to -10 bringing them closer to their more financially stressed non-college educated peers, now at minus 21.

Financial Security: Staying Healthy and Being Your Own Boss

Three years after the downturn began, the survey reveals 44 percent of Americans feel less financially secure now than they did at the start of the economic downturn in 2008. Only 10 percent of consumers reported feeling more financially secure, while 45 percent reported feeling about the same.

“Two years after the economy started rebounding, the level of financial insecurity is extremely high,” said Jonathan Clements, Director of Financial Education, Citi Personal Wealth Management. “It shows just how profoundly consumers have been impacted by the recent economic and political turmoil.”

As consumers continue to weather the downturn, the survey found that the top factor cited for financial security today is staying healthy (45 percent), followed closely by having a secure job (41 percent). Slightly more than three in ten Americans (32 percent) cited avoiding debt, but other factors such as having an emergency fund (17 percent), owning your own home (16 percent), and having a college degree (15 percent) were noted.

When it comes to staying financially secure in today’s economy, nearly a third of Americans (32 percent) believe that being their own boss is best. Working for a large corporation (24 percent) and the federal government (21 percent) are also viewed as safer employment options than working for a small business (17 percent) or for a state or local government (15 percent).

Feeling the Pinch: Consumers Get Savvy

When it comes to saving and spending, Americans are increasingly concerned about paying for necessities like food and gasoline, with significant proportions of Americans making deep and permanent changes to the way they save and spend.

– 41 percent are worried about the amount they pay for necessities like food and gasoline, up 18 points from September 2010
– 28 percent are concerned about the cost of health care
– 21 percent are concerned about the security of their retirement accounts

Americans are not just trimming the fat from their personal finances, but making deep cuts:

– 30 percent have changed living arrangements in order to save money
– 24 percent are doing jobs now that they would not have chosen in a better economy
– 24 percent have decided to postpone retirement

Americans are also becoming savvier consumers:

– 72 percent are using coupons they receive in the mail, newspapers or magazines
– 62 percent are cutting back on premium products like coffee and food in favor of less expensive options
– 44 percent are shopping more at bulk food stores
– 36 percent are using online special offers

“After a summer filled with debt negotiations and a credit rating downgrade, we spoke with Americans when the stock market was particularly volatile. All of this has clearly taken a toll on consumer confidence,” said pollster Peter D. Hart, who conducted the survey. “It will be interesting to see if America’s mood brightens in the next quarter.”

In Citibank’s quarterly surveys, the percentage of consumers who believe things are forever changed has steadily increased from 51 percent in September 2010 to 52 percent (January 2011) to 54 percent (April 2011) to 57 percent today.

For more information at http://www.citigroup.com