New Citibank Survey Reveals a Meaningful Increase in Economic Optimism for 2011

Americans take moderately brighter view of local economic conditions, job prospects and buying climate
Top financial priority is reducing debt; 25 percent admit worst habit is impulse spending

New York – A new nationwide survey issued today by Citibank revealed that, as 2011 begins, American consumers have a slightly more positive outlook on the current condition of the national and local economies, and substantially more optimism about economic trends and their own personal financial situations over the next 12 months.

The survey, conducted by Hart Research Associates, found 63 percent of the public is optimistic that local business conditions will improve over the next 12 months. This represents an 11-point increase since September 2010. Still, most people (76 percent) rate current conditions as fair or poor, while just 24 percent saying current conditions are good or excellent – a three-point increase in positive assessments since September 2010.

Findings part of new Citibank Economic Pulse
Today’s survey findings were released as part of the new Citibank Economic Pulse, a quarterly measure of Americans’ attitudes toward the economy. Citi first began compiling data for the Pulse in September 2009 to better understand changes in the needs of the consumers and communities the company serves. Overall, the Pulse, which combines eight survey questions into a single measure of overall economic status and future outlook, moved up eight points, the largest move since tracking began in 2009, but remains in negative territory at –6. All components of the Pulse moved upward except Americans’ comfort with their level of debt, which remains unchanged. The biggest change is in future expectations of the economy, while evaluations of current conditions advanced far more modestly.

The economy: Is light on the horizon sustainable?
This uptick in optimism since September is reflected in a number of areas, including:

* Personal financial situations: 70 percent of those surveyed are somewhat or very optimistic that their own financial situations will improve this year, up six points, while 27 percent are somewhat or very pessimistic their financial situations will improve, a decline of four points.
* Consumer Demand: The percentage of Americans who believe it is a good or excellent time to make a major purchase, such as furniture, an automobile or a television, increased four points to 36 percent. A 62-percent majority believe it is only a fair or poor time to make a major purchase. This is four points less negative than in September 2010.

Yet, Americans’ optimism is tempered. While Personal financial situations: 70 percent are somewhat or very optimistic that their own financial situations will improve this year a third (33 percent) expect 2011 will be “financially better,” 52 percent expect the year will be “financially the same” as 2010 and 14 percent expect it to be worse.

* Employment opportunities: Just 16 percent rate employment opportunities as “excellent” or “good,” an increase of two points. Although the most negative assessments, “poor,” have declined six points to 45 percent, another 37 percent rate employment opportunities “only fair,” which is a four-point increase.
* The survey finds a 59-percent majority believes the economy still has a ways to go to hit bottom, a decline of five points, while 38 percent believe the economy has pretty much hit bottom, an increase of seven points.

“For the first time in a year, the survey has revealed clear signs that consumers are starting to see light on the horizon,” said Michelle Peluso, Chief Global Consumer Marketing and Internet Officer, Citi. “While Americans are positive about their own future, they continue to have concerns about the broader economy. The downturn’s impact on priorities and behavior has been profound and appears to be more permanent than in previous recessions that were shorter and not as deep.”

Optimism up across all income groups, rising most in the South

Americans in the South are the most optimistic about local business conditions in the coming 12 months (67 percent expect improvement) and experienced the biggest increase with a 17-point gain since September. By contrast, 62 percent in both the Northeast and the West (representing a 10- and 11-point gain, respectively) and 59 percent in the Midwest (representing a seven-point gain) expect conditions to improve.

Americans with the highest incomes, those earning more than $150,000, show the greatest increase in optimism, with a full 76 percent saying local business conditions will improve in 2011, a 23-point gain. Optimism is up by at least eight points across all income groups. Americans making less than $50,000 are significantly more optimistic than they were in September, with 61 percent expecting improvements, representing a 12-point gain.

Top financial priority of 2011: Reducing debt

Although Americans are feeling slightly more comfortable with their level of savings, the survey found that Americans remain constrained by debt. While comfort with their level of savings marginally improved, comfort with their current level of debt was unchanged from four months ago, and reducing debt topped the list as the top financial priority for the year.

* 50 percent of Americans are somewhat or very comfortable with their level of savings, up four points since September, while 49 percent are somewhat or very uncomfortable, a decline of three points.
* 60 percent of Americans are somewhat or very comfortable with their level of debt, unchanged from four months ago; 38 percent remain somewhat or very uncomfortable.
* 29 percent of Americans report that reducing their overall level of debt is their top financial priority for the year. Other top priorities were putting more money into long-term savings (24 percent), lowering monthly expenses (24 percent) and being able to meet monthly expenses (19 percent).

“Over the past year, we’ve seen an abundance of financial caution among consumers, despite indications that the economy has been improving,” said Jonathan Clements, Director of Financial Education, Citi Personal Wealth Management. “The Great Recession was a financial wake-up call for many Americans who have embraced, whether by necessity or by choice, the idea of living within their means. That may be a smart move for individual households. But it could put a damper on overall economic growth.”

Bad financial habits to break in 2011: Impulse spending tops list

When asked what bad financial habits they’d like to break in 2011, 25 percent of Americans responded they’d like to stop spending on things that they don’t need; 11 percent would like to start keeping track of daily spending; 10 percent would like to develop and stick to a budget; and nine percent want to stop spending more than they earn.

Citi conducted this nationwide survey as part of its ongoing effort to better understand changes in the needs of the consumers and communities the company serves.

Citi
Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Through Citicorp and Citi Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management. Additional information may be found at www.citigroup.com or www.citi.com.

Survey Methodology
Hart Research Associates conducted the telephone survey of 2,002 adults nationally from January 10-17, 2011. The Random Digit Dialed (RDD) survey has an overall statistical margin of sampling error of plus or minus 2.19 percentage points. The survey also included a sample of respondents who use only a mobile telephone.

Pulse Methodology
The Citi Economic Pulse is calculated by subtracting negative responses to each item from the positive responses for 8 Pulse items, divided by 8. The 8 Pulse items include: current condition of the economy in area; business conditions in area over the next twelve months; current employment opportunities in area; buying climate for big ticket items; personal financial situation compared to a year ago; outlook on personal financial situation for the next twelve months; comfort with current level of savings; and comfort with current level of debt. The Pulse scale can range from +100 (if every respondent gave positive response to each of the 8 questions) to -100 (if all respondents expressed consistently negative views).