Psychology Of Recession And Recovery March 2009

The Psychology of Recession & RecoveryThe Psychology of Recession & RecoveryThe Psychology of Recession & RecoveryThe Psychology of Recession & RecoveryPresentation to UCD Geary InstitutePresentation to UCD Geary Institute

Gerard O’NeillGerard O’Neill

Amárach ResearchAmárach ResearchMarch 2009March 2009

1Psychology of Recession & Recovery

March 2009March 2009

© Amárach Research, 2009© Amárach Research, 2009

1. Ireland’s Recession:1. Ireland’s Recession:

is it psychological?

2. Reality Check:

hearts & wallets

3. The Road to Recovery:

prudent optimism


prudent optimism

1. Ireland’s Recession:

is it psychological?


“The attention paid to the Depression

story may seem a logical consequence of our economic situation. But the

Irrational Despondence

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 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

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)?(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


CSI

CEC

ICE

Spooked Consumers …

6Psychology of Recession & Recovery Source: ESRI (www.esri.ie)

Wrong Way

7Psychology of Recession & Recovery Source: CSO (www.cso.ie)

8Psychology of Recession & Recovery Source: CSO, ESRI, Amárach calculations

9Psychology of Recession & Recovery Source: CSO, ESRI, Amárach calculations

All Together


Source: Amárach Research consumer survey, February 2009

Not Looking Forward



… and Spooked Businesses


Source: Markit – Ireland Services PMI Report

Tough Going

13Psychology of Recession & Recovery Source: European Commission, January 2009

2. Reality Check:

hearts & wallets


Pancake Tuesday


Market Cap lost 80% of valuein 24 months

Hysterical Context


XISEQ Down -80.3%

http://dshort.com/charts/bears/four-bears-large.gif

Shop ‘til you stop

The contraction in retail spending is far in excess of


spending is far in excess of any contraction in incomes

Source: CSO (www.cso.ie)

Shopping Around

18Psychology of Recession & Recovery Source: National Consumer Agency (www.nca.ie)

Price Comes First

19Psychology of Recession & Recovery Source: National Consumer Agency (www.nca.ie)

Not So Tough?



3. The Road to Recovery:

prudent optimism



Homeland Defensive


http://www.washingtonpost.com/wp-dyn/content/article/2009/02/25/AR2009022502769.html

Feeling Closer ...


http://www.thedailybeast.com/blogs-and-stories/2009-02-10/the-new-baby-bust

... Much Closer


http://www.thedailybeast.com/blogs-and-stories/2009-02-10/the-new-baby-bust

Incorrigible Optimists


Source: www.sirc.org

Positives & Negatives


Source: www.sirc.org

Back to Basics?



“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.

Controlled Confidence

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


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 "confidence.”

Greg Mankiw

http://gregmankiw.blogspot.com/2009/01/shiller-on-animal-spirits.html

It’s Only A Recession

31Psychology of Recession & Recovery http://www.heritage.org/Research/Economy/wm2191.cfm

Recessions and Recoveries have one

thing in common: they are usually well

This is my 4th recession, and I’ve learned that ...

Recessions are macroeconomic

phenomena in the main ... whereas

thing in common: they are usually well

under way before they show up in the official statistics.


phenomena in the main ... whereas

Recoveries are microeconomic phenomena.

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 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


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 businesses want, anywhere.

• Innovating - innovation has been democratized: the tools are now available to co-create solutions to a wider range of problems than ever before.

http://www.bizcamp.iehttp://geary.ucd.ie/irishrecovery/

The big opportunity in The big opportunity in The big opportunity in The big opportunity in

a recession: to remind a recession: to remind

people there’s people there’s mmororee to to

life than economics!life than economics!


life than economics!life than economics!

Gerard O’NeillGerard O’NeillExecutive Chairman Executive Chairman –– Amárach ResearchAmárach Research11 Kingswood Business Centre11 Kingswood Business Centre

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Dublin 24Dublin 24

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Psychology Of Recession And Recovery March 2009