Pethokoukis

Why is consumer confidence up?

092512confidence

A perplexing consumer confidence report is out today. The Conference Board said its index of consumer attitudes rose to 70.3 from an upwardly revised 61.3 in August. That’s the highest level since February and way above expectations for 63, according to a Reuters poll.

So how could confidence be rising when economic growth seems about as weak as last year, and payroll growth even weaker?

First of all, these numbers are still terrible. As Action Economics points out: “Confidence remains at historically recessionary levels thanks to fears of government insolvency in the face of the 2013 fiscal cliff, problems in Europe, high food and energy prices, a never-ending balance sheet expansion at the Fed that might not end well, and escalating conflict in the Middle East.”

Similarly, the survey’s labor market component was also up, showing its best reading since April. But as JPMorgan’s econ team points out, that reading is “still very weak by historic standards.” But the numbers are up. I wonder if one reason isn’t greater optimism from Democrats still pumped up from their convention. Or perhaps consumers have bought into the New Normal outlook and lowered their expectations. Rising stock and housing prices also increasing wealth.

3 thoughts on “Why is consumer confidence up?

  1. I am not really sure Consumer Confidence tells us anything useful.

    The Confidence number is pretty terrible, yet annual Retail Sales (excluding automobiles and adjusted for inflation) is at record levels. To me, this is a better indicator of how consumers feel. After all, their money is on the line.

  2. Why shouldn’t confidence turn? The two biggest economic sectors, housing and autos, have turned. Auto sales are at multi-year highs and home construction is up 14 months running. Housing still has a long way to go reach full recovery but so does confidence.

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