Sunday, October 19, 2008

The Consumer Distraction Index

I didn’t realize quite how much energy I was putting into the presidential election until I stopped. I had been following the candidates’ positions and voter reactions day by day, but somewhere between watching the final debate and being locked out of a rally three miles from home, it struck me that the race had diverged so much that it wasn’t really a race any more. I stopped following the race, and suddenly, everything looked different.

I was not the only one following the presidential race. A major polling company estimated from a poll last week that 55 percent of eligible voters have been following the race on a daily basis. That is more people than usually vote in an election. We know also that the presidential debates and convention speeches drew huge television and Internet audiences.

In the television business, it goes without saying that a large debate audience takes viewers away from other programs. It is just as true that a large debate audience takes viewers away from the movies, the restaurants, the mall, the auto races — away from consumer activity generally. As I wrote a couple of months ago, the distraction of the presidential race led manufacturers to delay the introduction of thousands of products. They want to introduce products at a time when the public will pay attention, and many of those product introductions will come in the two weeks after Election Day and at the beginning of next year.

Also this month, people have been following the slow-motion collapse of the global financial system with considerable interest. And in my area, I can’t help but notice how much people are suddenly interested in baseball.

All such distractions tend to reduce economic activity. When you spend extra time following the news, you are not spending or looking for a job. People can even forget to eat — and if a lot of people eat 10 percent less on any given day, it’s economically significant. And it is not just the news headlines that distract people’s attention. The dramas of life are at least as gripping. A friend spent last night in a hospital with his ailing father. Another is eagerly waiting to find out whether he was chosen for a part in a theater production. The more time people spend on the events of their own personal lives, the less time they have available to act as consumers.

This has an enormous effect on the national economy, but as far as I know, no one measures the degree of distraction, and even in times like these, economists usually ignore the effects of consumer distraction on consumer spending. I don’t believe anyone has ever attempted a consumer distraction index, but without considering what is on consumers’ minds, we can’t really track what is going on in the economy.

The closest thing we have is consumer confidence. There are various measure of consumer confidence, and as far as I know, all the major ones are based on telephone surveys that ask questions such as, “Do you think now is a good time to buy a major appliance?” The inclusion of questions such as these tends to reduce consumer confidence when consumers are distracted. A consumer who is thinking, “No, now is a good time to watch the World Series,” will offer pollsters less enthusiasm about consumer spending. The consumer seems less confident, but is actually just distracted. My hunch is that between 2 and 4 percent of the variations in consumer confidence numbers actually reflect changes in consumer distraction.

Just as consumer confidence affects some industries more than others, consumer distraction affects different industries in different ways. Distracted consumers are less likely to eat steak and more likely to eat pizza and drink coffee. They may suspend spending on matters of style while burning through more cell phone minutes than usual. Visit the mall during a big playoff game involving a local team, and you can see how much consumer distraction affects the retail sector. It is easy to imagine ways in which it could be useful to track consumer distraction.

I am not suggesting a design for a consumer distraction index at this point. That will take more research. I am only suggesting that a consumer distraction index would be a useful thing to have. But even without any specific measures to rely on, distraction is an important effect to be aware of whenever we try to understand patterns of consumer behavior.