Psychology Of Recession And Recovery March 2009

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Insights into the psychological drivers of economic recessions and recoveries.

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Psychology Of Recession And Recovery March 2009

  1. The Psychology of Recession & Recovery Presentation to UCD Geary Institute Gerard O’Neill Amárach Research March 2009 © Amárach Research, 2009 1 Psychology of Recession & Recovery
  2. 1. Ireland’s Recession: is it psychological? 2. Reality Check: hearts & wallets 3. The Road to Recovery: prudent optimism Psychology of Recession & Recovery 2
  3. 1. Ireland’s Recession: is it psychological? Psychology of Recession & Recovery 3
  4. Irrational Despondence “The attention paid to the Depression story may seem a logical consequence of our economic situation. But the retelling, in fact, is a cause of the current situation — because the Great Depression serves as a model for our expectations, damping what John Maynard Keynes called our “animal spirits,” reducing consumers’ willingness to spend and businesses’ willingness to hire and expand. The Depression narrative could easily end up as a self-fulfilling prophecy.” Robert J. Shiller http://www.nytimes.com/2009/02/22/business/economy/22view.html?_r=2&ref=business 4 Psychology of Recession & Recovery
  5. Measuring Consumer Confidence The ESRI conducts a monthly, nationally representative telephone survey of 1,100 adults aged 18 and over which asks five questions: Q.1. How do you think the economic situation will develop over the next 12 months? (get better/stay the same/get worse) Q.2. Do you think the number of people out of work in the country in the next 12 months will (increase/remain the same/decrease)? Q.3. How does the financial situation of your household compare now with what it was 12 months ago? (got better/stayed the same/got worse) Q.4. How do you think the financial position of your household will change over the next 12 months? (get better/stay the same/get worse) Q.5. In view of the general economic situation at the present time, what do you think about people buying large items such as furniture, washing machines, TV sets etc. Do you think that for people in general the present time is (good/neither good nor bad/bad)? These are used then to derive the three indices as follows: CSI CEC ICE 5 Psychology of Recession & Recovery
  6. Spooked Consumers … 6 Source: ESRI (www.esri.ie) Psychology of Recession & Recovery
  7. Wrong Way Source: CSO (www.cso.ie) 7 Psychology of Recession & Recovery
  8. 8 Psychology of Recession & Recovery Source: CSO, ESRI, Amárach calculations
  9. 9 Psychology of Recession & Recovery Source: CSO, ESRI, Amárach calculations
  10. All Together Source: Amárach Research consumer survey, February 2009 10 Psychology of Recession & Recovery
  11. Not Looking Forward Source: Amárach Research consumer survey, February 2009 11 Psychology of Recession & Recovery
  12. … and Spooked Businesses Source: Markit – Ireland Services PMI Report 12 Psychology of Recession & Recovery
  13. Tough Going Source: European Commission, January 2009 13 Psychology of Recession & Recovery
  14. 2. Reality Check: hearts & wallets Psychology of Recession & Recovery 14
  15. Pancake Tuesday Market Cap lost 80% of value in 24 months 15 Psychology of Recession & Recovery
  16. Hysterical Context X ISEQ Down -80.3% 16 Psychology of Recession & Recovery http://dshort.com/charts/bears/four-bears-large.gif
  17. Shop ‘til you stop The contraction in retail spending is far in excess of any contraction in incomes Source: CSO (www.cso.ie) 17 Psychology of Recession & Recovery
  18. Shopping Around Source: National Consumer Agency (www.nca.ie) 18 Psychology of Recession & Recovery
  19. Price Comes First Source: National Consumer Agency (www.nca.ie) 19 Psychology of Recession & Recovery
  20. Not So Tough? Source: Amárach Research consumer survey, February 2009 20 Psychology of Recession & Recovery
  21. 3. The Road to Recovery: prudent optimism Psychology of Recession & Recovery 21
  22. 22 Psychology of Recession & Recovery
  23. Homeland Defensive http://www.washingtonpost.com/wp-dyn/content/article/2009/02/25/AR2009022502769.html 23 Psychology of Recession & Recovery
  24. Feeling Closer ... http://www.thedailybeast.com/blogs-and-stories/2009-02-10/the-new-baby-bust 24 Psychology of Recession & Recovery
  25. ... Much Closer http://www.thedailybeast.com/blogs-and-stories/2009-02-10/the-new-baby-bust 25 Psychology of Recession & Recovery
  26. Incorrigible Optimists Source: www.sirc.org 26 Psychology of Recession & Recovery
  27. Positives & Negatives Source: www.sirc.org 27 Psychology of Recession & Recovery
  28. Back to Basics? 28 Psychology of Recession & Recovery
  29. Psychology of Recession & Recovery 29
  30. Controlled Confidence “Yale's Bob Shiller argues that confidence is the key to getting the economy back on track. I think a lot of economists would agree with that. The question is what it would take to make people more confident. Bob thinks that confidence would rise if the government borrowed more and spent more. Other economists think that confidence would rise if the government committed itself to, say, lower taxes on capital income. The sad truth is that we economists don't know very much about what drives the animal spirits of economic participants. Until we figure it out, it is best to be suspicious of any policy whose benefits are supposed to work through the amorphous channel of quot;confidence.” Greg Mankiw 30 Psychology of Recession & Recovery http://gregmankiw.blogspot.com/2009/01/shiller-on-animal-spirits.html
  31. It’s Only A Recession 31 http://www.heritage.org/Research/Economy/wm2191.cfm Psychology of Recession & Recovery
  32. This is my 4th recession, and I’ve learned that ... Recessions and Recoveries have one thing in common: they are usually well under way before they show up in the official statistics. Recessions are macroeconomic phenomena in the main ... whereas Recoveries are microeconomic phenomena. Psychology of Recession & Recovery 32
  33. Recovery 2.0 Recovery 2.0 will be assisted by the Facebook generation: those 20-35 year olds who are now experiencing their 'first recession'. They intuit better than most the potential for the web (including mobile) to facilitate their personal responses to recession including: • Freelancing - if you can't be an employee be a sub- contractor: better to have lots of bosses (called clients) because if one lets you go then there are others to keep you occupied. • Networking - it's all about who you know: and the likes of Facebook and LinkedIn make it easier than ever to get in touch, stay in touch and be connected with potential customers and suppliers. • Discovering - using the web to conduct ultra cheap (even free) research to find out what consumers and http://www.bizcamp.ie businesses want, anywhere. http://geary.ucd.ie/irishrecovery/ • Innovating - innovation has been democratized: the tools are now available to co-create solutions to a wider range of problems than ever before. 33 Psychology of Recession & Recovery
  34. The big opportunity in a recession: to remind people there’s more to ore life than economics! 34 Psychology of Recession & Recovery
  35. Gerard O’Neill Executive Chairman – Amárach Research 11 Kingswood Business Centre Citywest Business Campus Dublin 24 T. (01) 410 5200 E: gerard.oneill@amarach.com gerard.oneill@ W: www.amarach.com B/GON: www.turbulenceahead.com 35 Psychology of Recession & Recovery
  36. Appendix: About Amárach We are Ireland’s largest independent market research agency, in business since 1989. We focus on delivering two key benefits to our clients: 1. Consumer Foresight – using research to say ‘what next’. 2. Business Insight – using research to make business decisions. We provide the full array of market research services including: - Quantitative: face-to-face, telephone, web - Qualitative: focus groups, in-depths, ethnographic - Field Only: for international & domestic agencies Register for our free fortnightly eletter consumerforesight at: www.amarach.com Read our daily blog: www.amarachresearch.blogspot.com Psychology of Recession & Recovery 36

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