Consumers are confident? You’ve gotta be joking …

Kate Davidson Aug 27, 2013
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Consumers are confident? You’ve gotta be joking …

Kate Davidson Aug 27, 2013
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It may seem funny to assign a number to consumer confidence. It’s part how people feel about the economy now. And part how they expect the economy to be in coming months. Put it all together and the Conference Board’s Lynn Franco says this month’s Consumer Confidence Index, is 81.5 — above economists’ predictions but  still below pre-recession levels.

“Generally when they’re extremely confident we get readings of 90 or above,” she says. “So we’re sort of on the right path, but we still have a ways to go.”

Economists say the tailwinds on that path are that the job market is slowly improving, stock prices are up, and housing prices are rising. But there are plenty of tailwinds.

“Wage growth is very weak, the unemployment rate — although it’s coming down — is still at 7.4 percent,” says Gus Faucher, a senior economist with the PNC Financial Services Group. “And overall employment’s down by about two million from where it was prior to the recession. So those are drags on confidence.”

One thing about this month’s measure of consumer confidence is that the expectations component went up. People were more optimistic.That’s in part because the recovery has been so anemic, it only takes a little bit of good news to boost consumers’ confidence, says Chris Christopher, an economist with IHS Global Insight.

“So what would make them happy now takes a lot less on the economic front than it would in 2005, when things were doing very well,” he says.

Economists say consumer confidence is important because it’s an early predictor of trends in the economy — in this case, a modestly upward trend.

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