Should Anyone Care About Consumer Confidence?
The Times had a piece on the recent dip in consumer confidence this morning that backs up my view. The article includes a chart that shows the latest reading for the index is near its 2002 levels, when real consumer spending rose at a respectable 2.5 percent annual rate and the savings rate fell by more than a percentage point. In other words, a low consumer confidence index did not seem to have much impact on consumption growth.
The index probably does give useful information about public attitudes, which can make a big difference politically (at present, high gas prices are making many people feel stretched and angry), but it is not telling us much about the direction of consumer spending or the economy.