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Home Publications Blogs Beat the Press Consumer Expectations Are Always Erratic

Consumer Expectations Are Always Erratic

Wednesday, 30 January 2013 05:36

Floyd Norris is worried about a sharp drop in consumer confidence. He shouldn't be.

The cause of the drop is a fall in consumer expectations about the future. Expectations jump around because most people aren't in the business of sitting down and thinking about where the economy will be in 6 months. For the most part, people answer this question based on what they hear in the news. Since news reporting on the economy is very fickle, people's views about the future are very fickle.

Fortunately, expectations have very little impact on people's consumption decisions. Their consumption is far more stable, indicating that people rely on their current economic situation -- wages, job security, housing equity -- in making their consumption decisions and they largely ignore the folks seen and heard pontificating in the media.

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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.