Housing prices continue to drop precipitiously. Job losses are accelerating. The banks, far from coming back from the brink, remain teetering on the edge of insolvency. The S&P 500 is down nearly 7% for the year. A worsening recession may actually push down average incomes. Is it any surprise that consumer confidence is down?
Bizarely enough, the answer is yes. Confidence among U.S. consumers fell to 37.7, down almost a point from the revised December number of 38.6, according to today’s report from New York based private research group The Conference Board. That’s the lowest level ever since they started measuring this stuff back in 1967. And this caught economists off-guard. They had predicted that consumer confidence would actually rise in January.
Consumer confidence is quite rationally following consumers perceptions of their own current wwealth and prospects down the drain. As the American public keeps getting poorer, they keep losing confidence. So why are economists missing this?
It seems that many economists continue to believe that America’s consumer culture could never change, even as the economic realities of their lives change. It’s another instance of the the kind of thinking that has brought us to this economic crisis: that the markets will revert to historical means rather than change directions. Will this number shake the confidence of economists? Probably not. The economy has come off rails but they are still staring at the maps rather than looking at the territory.
(Chart via Market Harmonics.)