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There Are Good Reasons Why Consumer Confidence Is Low

Most people have heard about statistics or polls that report on the state of the American consumer and something called “consumer confidence,” but few know what they are or what they mean or even recall what the latest reports reveal.

You might have also heard that Keynesian Paul Krugman had claimed that such statistics were biased against Democrats and President Biden, but my colleague at the Mises Institute, Jonathan Newman, showed that properly understood the statistics from late last year were reasonable and straightforward. You should follow Dr. Newman’s writings on

As the American and world economy begin to emerge from the economic chaos induced by Covid and the Government’s and Federal Reserve’s “war of all against all” we are beginning to see more synchronicity in economic reports and statistics and therefore more clarity about the state and direction of the economy.

The consumer confidence index seemed be reemerging as a reliable number after the period of chaos, free money, and unlimited job opportunities.

One tangible example of the a-synchronicity in markets, or dysfunctionality of markets, is the housing market where Fed policy is keeping people from selling their homes in order to move, resulting in tight supplies and much higher prices, which is preventing people from buying.

In that light I would like to discuss the state of “consumer confidence.”

The Consumer Confidence Survey and Index is data from thousands of individual Americans collected by the Conference Board, a private institution. They survey American consumers on their current and prospective views of the economy regarding such things as their income, price inflation, buying plans, and even vacations, but also their expectations for business, stock prices and interest rates. They also collect the information by people’s age, income, and region so that responses can be weighed and sorted.

While the recent report for April had mixed results for the economy, I believe that given the recent drop in job openings that the numbers are painting an increasingly clear picture of the worsening economy we identified last year and therefore economic conditions will continue to worsen.

The overall Consumer Confidence Index now has three months of decline but remains out of negative territory. In most areas, confidence has declined only marginally in the recent report with respect to job prospects, family financial conditions, inflation, etc. and expectations of a recession have decreased to relatively low levels.

However, confidence is fickle and often changes dramatically right before and during an economic recession or crisis. Confidence has already dipped as low as during the Covid Chaos period range and seemed to have resumed the downward trajectory that began in 2018—interrupted by Covid—so my expectations from 2018, which again, were interrupted by the Covid Chaos, that we reach a new all-time low in consumer confidence may yet be realized and realized much quicker than possibly imagined.

With labor markets tightening, interest rates edging higher, and planned purchases of big-ticket items like homes, vehicles and appliances, vacations and discretionary items all declining, we will continue to monitor these numbers closely in the coming months. Of course, we also see higher probabilities of shocks in financial markets, foreign affairs, and commodities in the coming months as a potential catalyst for discrete drops in consumer confidence.

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Mark Thornton
Mark Thornton is Senior Fellow at the Mises Institute. He serves as the Book Review Editor of the Quarterly Journal of Austrian Economics. His publications include The Economics of Prohibition (1991), Tariffs, Blockades, and Inflation: The Economics of the Civil War (2004), The Quotable Mises (2005), The Bastiat Collection (2007), An Essay on Economic Theory (2010), The Bastiat Reader (2014), and The Skyscraper Curse and How Austrian Economists Predicted Every Major Crisis of the Last Century (2018).
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