Consumer Confidence Is Up – Why?

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Of all the economic news that was released in the past few days, one was particularly surprising. Consumer confidence, which measures how optimistic people are about the economy, rose to its highest level in eight months (article). While not exactly at a high number, it was significantly higher than analysts had expected. What do people have to be confident about?

Another interesting thing about the consumer confidence figure is that it has been on a steady, albeit slow, climb since it reached a low in November of 2008.

An Abundance Of Bad News  

You wouldn’t think that it was possible for people to be more confident with the steady diet of bad news we are being fed on a daily basis. Here are some of the recent reports of doom and gloom:

What's next for the economy?

What's next for the economy?

  • Chrysler in bankruptcy with GM to follow
  • Oil rising again, up 30% in May
  • Record 12% of homeowners are behind in their mortgage
  • Home prices fall a record 19.1% in 1st quarter of 2009
  • Another 539,000 jobs lost in April
  • 5.7 million jobs lost since December 2007
  • Unemployment at 8.9% and climbing
  • Economy sank 5.7% in 1st quarter based on GDP
  • Federal Government to borrow 46 cents for every dollar it spends

And on, and on, and on. There seems to be no end in sight to all of the bad news. Yet, somehow people are feeling better about the economy.

Numbness Sets In

It could be that people are so conditioned to bad news that it is no longer shocking. Things that might have seemed horrifying a year ago are commonplace now. Perhaps this is a good thing. An economy is nothing more than money in motion. If money doesn’t change hands then the economy stalls. When people are in the grips of fear, irrational or not, they don’t spend.

It could be that people have adjusted to a new reality. Is everything suddenly better? Of course not, but people are no longer expecting some sort of miracle turnaround. The campaign trail rhetoric from both sides made it seem as if some “plan” was going to fix everything and things would be like they were before. The reality is that things need to run their course and the economy has to adjust.

Perhaps people are just sick and tired of being sick and tired. Life goes on and people do as well. As a nation America has always been resilient and found a way to deal with whatever challenges it faced. The turmoil has created an abundance of opportunities and those with a will to survive and thrive are beginning to take advantage of them. Record foreclosures and real estate price reductions have created a wealth of opportunity for investors. Are things challenging? Absolutely, the road ahead will be rough to say the least. But maybe things are as bad as they are going to get and we can look forward to better days. Perhaps the glass is half full after all.

Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence. – Helen Keller

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3 Comments

  1. There could be another explanation. I was recently surveyed and the first question they asked to base whether or not I qualified for the survey was my job. I said I was in real estate and they said I didn’t qualify. Makes me wonder if they are surveying only people that will fit into the story they are hoping to tell.

  2. Most consumers know little about what is actually happening in the economy. Their confidence is based on the rhetoric coming from the government, which is flush with doublespeak. I put little faith in the confidence number when it relies on the opinions of the general public.

  3. More and more bad news everywhere, and the economy is falling a part and people believe everything that Media and the Government is throwing at them , or maybe they don’t care anymore .

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