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Home Publications Blogs Beat the Press Consumer Confidence Index (the one that matters) Declines

Consumer Confidence Index (the one that matters) Declines

Tuesday, 26 March 2013 19:36

The Conference Board's index of consumer confidence fell in March. What is noteworthy for those following the economy is that the current conditions index dropped by 3.5 points to 57.9. This component is the one that actually tracks current consumption reasonably closely, so it is giving us information about the economy.

By contrast the future expectations component is highly erratic and bears little relationship to actual consumption patterns. Reporters generally don't make a point of distinguishing between these two components. This can lead them to misinform the public about the economy.

For example there were many stories last fall highlighting falls in the index based on the future expectations index. These drops were undoubtedly attributable to media accounts warning of the end of the world if we went off the "fiscal cliff." As we now know, consumption spending held up just fine through the fall.

The recent drop in the current conditions index however should be taken as a serious warning that consumers may be tightening their belts. That would not be a surprising response to the ending of the payroll tax cut, plus some amount of layoffs and cutbacks associated with the sequester.

This is just one report among many, but it does suggest that the recovery optimists singing about having finally turned the corner may be wrong.


Comments (6)Add Comment
Watch What They Do, Not What They Say
written by Paul Mathis, March 26, 2013 9:32
TruCar which tracks the auto industry closely predicts:

The March 2013 forecast translates into a Seasonally Adjusted Annualized Rate ("SAAR") of 15.42 million new car sales ... up from 14.1 million in March 2012.

If American consumers are broke and pessimistic, why are auto sales up another million over the past year? Compare Europe where sales hit a 17 year low last year and continue to fall this year even in northern Europe.
what they've been doing
written by David, March 26, 2013 10:39
In addition to auto sales, however:

So no point in popping that champagne cork, either.
and what about price-to-rent
written by pete, March 27, 2013 4:52
This is at 2002 levels when you and Shiller called the bubble, beating Krugman by 3 years (in fact he jokingly apparently said we could use a housing bubble in August 2002). Are we headed up another 3 to four years before a crash?
written by watermelonpunch, March 27, 2013 5:29
I'm just taking a wild guess here... But I think comparing the US auto sales to Europe auto sales is hugely flawed... There is much more of Europe where you don't need a car, compared to much of the U.S.
Consumer "Sentiment"
written by Ed, March 29, 2013 10:26
How does the index of consumer confidence differ from the index of consumer sentiment, which apparently was up in March (http://www.reuters.com/article...8S20130329)?
Conference Board versus Michigan Index
written by Dean, March 29, 2013 6:13
I consider both indexes equally good. The fact that they can go in opposite directions in the same period indicates the amount of error in these data. This is why I'm inclined to say that the current conditions measure tells us something, the expectations index tells us nothing. Reporters in general make way too much of these data.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.