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  • What Does Consumer Confidence Say About the Economic Forecast?

Uncategorized

27 May 2008

What Does Consumer Confidence Say About the Economic Forecast?

  • By Bill Conerly
  • In Uncategorized
  • 1 comment

The Conference Board reported their latest survey of consumer confidence, and it's no surprise that their results mirrored the gloomy report issued last week by the University of Michigan:
 
Confidence

What does consumer gloom mean for the economic forecast?  Let's look at some history:

ConsumerRetail

Two obvious conclusions:

  1. Growth of retail spending tends to correlate with attitudes, but
  2. The correlation is sporadic.  Specifically, the two concepts diverged in the early 1980s and again in the early 1990s.

For my money, I'd rather look at consumer fundamentals that surveys–we economists are trained to look at what people do, rather than what they say.  Right now the fundamentals are not as dour as consumers are:

  • Employment roughly flat (down by tenths of a percent the last few months)
  • Wage rates rising about in line with inflation (just tenths of a percent lower than total inflation)
  • Unemployment rate below its long-run average.

The bad attitudes are certainly not good news; but the bad news is moderately bad, not terrible.

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Bill Conerly

    Comments

  1. Confidence
    September 30, 2008

    wow great article I really enjoyed reading it thanks for bringing this into the light

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