Consumer Confidence is a Downer

Posted by: Henry B. | Mar 25,2008


The fact that consumer confidence is at a low doesn’t inspire, well, confidence.  But it’s hardly surprising.  The economic news is not great right now, any way you cut it.  But you sort of have to look at it like the presidential election.  What might look totally bleak for a candidate today might be totally fine a week from now.  

There is some hope on the horizon.  I just got my letter from the IRS in the mail stating that I was eligible for at least $1200: for a joint tax return and one child.  This money will of course be very helpful come May.  When millions upon millions of people get these checks in the mail, perhaps this will stem the tide of bad news.  Of course $1200 can’t fix everything, but it could potentially fix the perception of a bad economy: something is being done.  

Going back to the presidential election analogy.  Perception is very important.  I’m almost loath to link to an article talking about the downturn in consumer confidence.  I could imagine people reading such articles and actually be inspired to have less consumer confidence.  No one is going to be very enthusiastic about spending money if everyone around them is worried.  

Even so, consumer confidence is not always the best gauge about the strength of the economy.  Even if consumers choose to save their money or to pay down debt, this still will have a positive affect on the economy.  That’s why the stimulus bill can be effective.  Short of everyone choosing to not deposit that money, it’s going to have a positive affect even if people don’t go on a spending spree.  Saving the money will bring capital to banking institutions, and using the money to pay down debt, as is recommended, brings capital to credit card companies or other lenders.  

Much of the emphasis is how spending is going at the local mall.  While this is no doubt important for the continued strength of the economy, using the money wisely to pay down debts or to invest can also spur the economy forward.   

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