With consumer spending accounting for about 70% of the U.S. economy, it is important to understand how households will behave. Will they show up at auto dealers, the malls, and online shopping sites or keep their wallets and purses shut?
A number of polling organizations regularly question households on their views of the current environment and the future. While a trend of steady decreases or increases in consumer confidence indices can portend general swings in consumer spending, month-to-month changes can often be just “noise.” What consumers do as opposed to what they say about their state of mind is the important trend to watch.
In addition, if we know what is happening with respect to jobs, incomes, home values, and stock prices no survey of consumer sentiment is necessary. We know how households will feel and how they will behave.
Recently, some of the consumer confidence indices have registered gains. This probably reflects the improvement in home and stock prices. Unfortunately, the weakness in jobs and incomes is likely to continue to dampen spending.
By Dr. Lynn Reaser