The Anteroom

Consumer Spending Trumps Consumer Confidence

By Curtis J. Barry

How much stock, as it were, should we put in consumer confidence?  However it is measured, consumer confidence hit high points when we were just out of the recession but not nearly into a recovered economy.  A recent low in consumer confidence was registered around the time of the debt ceiling crisis.  These events beg the question “do measurements of consumer confidence really matter?”

Any measurement of consumer confidence is simply a matter of opinion – that is indisputable.  But how is the opinion formed?  Consider that low point I referenced.  The debt ceiling issue is more of a government funding/budgetary concern than a personal economic one.  Yet because the media portrayed it as a crisis bad enough to send us retreating to our financial bomb shelters, people’s opinions thus projected a lack of confidence in an improving economy.

Signs of Recovery

Consider this week’s contradictory measurements; consumer confidence is up appreciably year-over-year and more so since 2008, yet consumer spending (an actual, measurable number), chugs along at only a slightly rising pace.  People will form an opinion on the macro economy based upon what they are told is happening.  However, their actions will reflect what is occurring within their personal micro economies, which, when added to what all the other families do, drives the national economy and real, measurable statistics.

Let’s accept consumer confidence for what it is – a forward looking opinion based upon factors which may not reflect the actual economy, and factors that are changeable with the next event the media decides to focus on.  In short, let’s pay attention to what people do, not what they say.