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With Consumer Confidence It is Only Current Conditions That Matter

Tuesday, 28 August 2012 10:55

There may be a temptation by some in the business media to make a big issue out of the sharp decline in the Conference Board's measure of consumer confidence. Those so tempted would be wrong.

The key point to note is that almost all of the decline was in the future expectations index. The current conditions index was essentially unchanged, edging down from 45.9 to 45.8. While current conditions index does fit reasonably well with current consumption, there is little correlation between the future expectations index and consumption. This index is highly erratic and therefore not a good predictor of consumption either present or future.

Comments (1)Add Comment
does it predict anything?
written by Melissa, August 29, 2012 5:34
Does the future expectations index correlate well to anything at all? If not, why do they keep producing it?

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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.