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Consumer Confidence Above Expectations: Are We Out of the Woods?

This article was written by in Consumer. 3 comments.

Depending on which newspapers and news websites you read, the Consumer Confidence Index either soared, jumped or surged this month. The headlines as you would expect don’t tell the whole story.

The Conference Board calculates this index by performing a random survey by phone of 5,000 households in the United States, selected because they represent the country as a whole. The questions in the survey ask the respondents how they feel about the economy as they look towards the next six months. Will there be more jobs available? Will they receive a raise?

The results of this questionnaire moved the Consumer Confidence Index from 47.4 in July to 54.1 in August, significantly beating the economists’ expectation of 48. Economists are calling this a major win for the economy, but to me it just looks like those in charge of the predictions got it wrong. If the expected August index was 55, we would see disappointed headlines rather than the exuberance expressed today and yesterday.

Consumer confidence becomes a “self-fulfilling prophecy” in some ways and a feedback loop in others. Those who respond to the surveys with a favorable outlook cause the Index to move upwards, and the news of the index moving upward encourages businesses to start operating as if the economy is heading soon towards recovery.

But let’s keep this in perspective. While the economists are joyous about the Consumer Confidence Index’s jump, the index is significantly below the level one would consider “good.” According to CNN, we would need to see an index of 90 before the economy can be considered solid. We’re only at 54.1. We have a long way to go before jobs start appearing in the market and before people start spending more.

Published or updated August 26, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 3 comments… read them below or add one }

avatar RJ Weiss

That sounds very accurate picture of our economy. We’re improving from the bottom, but still have a long way to go.

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avatar ctreit

It is also possible that we are just halting the decline for the time being and that we are not bottoming out. I for one am not so convinced that we are out of the woods yet. Many of the structural problems underlying the economy have not been resolved.

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avatar Sarah

Unemployment is expected to hit 10% nationwide, and that makes me extremely NOT confident. The market is improving, and some companies are reporting profits, but IMHO that does not accurately measure our economy as a whole if they are offshoring services and importing products.

I hope I’m wrong. We’ll see.

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