PHD Perspectives: News Coverage Impacts Consumers' Economic Optimism and Pessimism - Emily Vanides - MediaBizBloggers

"Foreclosure epidemic reaching more expensive homes."

"US budget deficit hits record $1.4 trillion."

"Wages could hit steepest plunge in 18 years."

"How Wall Street will kill the recovery."

This is just a sampling of recent headlines in the media. You can't turn on the television, log onto the Internet or open up a newspaper without hearing something negative about the economy. It's a wonder that more of us aren't packing our lunches for work, making our own clothes, and saving our precious little bit of extra money underneath our mattresses.

Part of the reason that I haven't resorted to this behavior (besides my non-existent sewing skills) is that, as a media professional, I understand that while these headlines might be fact-based, they are purposefully alarmist and negative. And they are alarmist and negative because this is what "sells."

This is hardly a new tactic. Meteorologists have been employing this approach for years now. If there is a slight chance that a rain shower might become a tropical storm or that snowfall might become a blizzard, it's the worst case scenario that becomes the meteorologists' headlines - no matter how miniscule the likelihood is. And giving credibility to the phrase "perception is reality," these headlines get spread around through the public via word of mouth. This can often lead to people making beelines to their grocery stores to stock up on candles and canned food items in order to prepare for a natural disaster that never comes.

"National disaster" is not a bad description of the current state of our economy. But how much have consumers' perceptions of the economy were influenced by journalists' quests to make headlines?

At PHD we are conducting a monthly study called the Return Of Consumer Optimism that explores consumers' purchasing behaviors and their optimism toward the economy. We've seen a strong relationship between the tone of the news and consumers' sense of optimism – the more negative the news coverage, the more pessimistic people feel about the economy. A key finding of the study is that knowledge is power. Consumers that are informed about the state of the economy from a greater variety of news sources tend to be more optimistic about their own personal financial situations as well as the country's outlook. The reverse is also true; the fewer news sources that people rely on in order to learn about the economy, the more pessimistic people feel about the economy.

The immediate result from the negative economic hype (and occasional hysteria) might be increased sales and profits. However, there appears to be a domino effect to this publicity. This pessimistic perception of the economy leads to decreased consumer spending, which in turn leads to less expenditures by advertisers. And the end result is…less revenue for the media in the long run.

The news editors might want to start thinking a few moves ahead and be a little more far-sighted the next time they are tempted to publicize that the sky is falling. I would certainly appreciate it, so that I don't have to learn how to sew.

Emily Vanides, Vice President, Group Director of Research, PHD Media, an Omnicom Company. You can follow PHD's Twitter feed at http://twitter.com/PHDisSmartMedia.