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Consumer confidence in the US economy: Cold or hot?

One of the most important economic indicators in the US is down. Or is it up?
Hot springs monkeyEnlarge
Consumer confidence in the US economy is cold. Or is it hot? Maybe it's both? This Japanese Macaque monkey probably feels the same way right about now. (Koichi Kamoshida/Getty Images)

When you come right down to it, confidence is the whole deal in economics.

That's because consumers need it to reach into their wallets, and spending makes up about two-thirds of all economic activity in the United States.

But businesses big and small also need confidence to hire people, buy capital goods and other stuff, and make investments in the future.

And all kinds of investors — from US Treasury note buyers, to Greek debt holders, to those looking to own shares in Facebook or any other company — need it, too.

In short, confidence matters.

A lot.

So how's consumer confidence these days in the world's largest economy?

Terrible.

Or great.

It depends on which report — and which group of two-handed economists — you want to believe.

Today the Conference Board said consumer confidence this month plunged to its lowest level since January.

Here's how Lynn Franco, Director of Economic Indicators at the Conference Board, put it in a statement:

"Consumer Confidence fell in May, following a slight decline in April. Consumers were less positive about current business and labor market conditions, and they were more pessimistic about the short-term outlook. However, consumers were more upbeat about their income prospects, which should help sustain spending. Taken together, the retreat in the Present Situation Index and softening in consumer expectations suggest that the pace of economic growth in the months ahead may moderate."

Now try this one on for size.

Just four days ago, the Thompson Reuters/University of Michigan Survey of Consumers rose to its highest point since 2007 — before the Great Recession began.

That consumer sentiment index, by the way, has risen for nine straight months.

Here's how Richard Curin, the Surveys of Consumers chief economist, put it in a statement:

“Consumer confidence was nearly as  high in the past two years before the gains were reversed. While gas prices and economic policy debates played a role  in the pull backs, changes in job expectations also  had a critical impact. The upbeat consumer reports on jobs could mean that more positive numbers will soon be reported by the government."

So there are two lessons to glean from these divergent, and very important, data points:

1) Nobody really knows what's going on with consumers and their current perceptions about the economy

2) See point one above

You're welcome.

http://www.globalpost.com/dispatches/globalpost-blogs/macro/consumer-confidence-down-or-up

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