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Hi Taylor
- Can you explain "consumer confidence" to me? I feel like that term
is thrown around as a way to tell me how I feel and I'd love to have
it broken down.
Hi Dan - That's a great way to describe it. We're all consumers,
so the metric really does feel like a poll that says, "This is how
you feel!" Of course, a lot of people don't see eye-to-eye with the
monthly Consumer Confidence Survey; it's at its highest level in over
two years and I know many people who don't feel confident with their
current economic situation. So let's break it down a little.
Since the late '70s, the Conference Board has indexed surveys about
economic indicators and the general public's attitude regarding the
economy. It's a monthly survey with a range of questions about people's
personal finances as well as the overall conditions in the country.
For the most part, consumer confidence tracks with a growing economy.
During the pandemic when things were shutting down, people's confidence
went with it. As inflation has eased up a little over the last year,
confidence has risen. All of that is as you would expect.
Taken at face value, consumer confidence doesn't tell us anything
new. The general confidence statistic isn't going to shake things
up too dramatically, and it's rarely going to offer a big surprise.
That said, the nuance of the report is a little more interesting and
actually gives some insight.
For example, a recent survey had only 21% of people saying business
conditions were good, but 46% of the same group said jobs were plentiful.
Using those two numbers, you can get a clearer picture of the economic
gray areas that people are dealing with.
It's not worth arguing over the validity of any given consumer confidence
report. Your reality is your own, and maybe 60% of the people surveyed
in a given month feel differently than you do. No one with a good
head on their shoulders will yell at you about solid consumer confidence
if you're trying to explain how hard it is to afford your mortgage
and groceries.
If there's one takeaway for me, it's the expectation part of the confidence
report, where we learn how some people are feeling about their prospects.
If a lot of people think things are going to get worse, that's an
indicator they won't be spending and investing as much. Doesn't matter
how good or bad my month has been-that's how those people feel.
In short, consumer confidence means exactly that, but it doesn't necessarily
reflect the confidence levels of all consumers. Hope this information
is useful, Dan! |
| Legal Disclaimer:
Information presented is for educational purposes only and is not
an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
to be answered in this column, please send it via email to Question@GoFarWithKovar.com,
or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.
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