A Consumer's Confidence

Today's release by The Conference Board of its monthly "Consumer Confidence Index" made for a very depressing read.   Click here for the press release in all of its miserable detail.  If you prefer to limit your misery intake for the day but still get the gist of the thing, the Los Angeles Times has a readable summary that can be found by clicking here.  In either case, it might be worthwhile to check out the same paper's comics page first--or after reading the news, or both before and after--for some diversion and amusement.

After reading the press release, the article, and some other information regarding The Conference Board and the survey behind the Index, these questions came to mind:  Who gets surveyed for this Index?  What are they saying to yield such a negative view of the future?

The Index showed a very large and unexpected drop from the previous month.  Apparently, the only time in recent history when the Index showed a lower result was in April 2009.  At that time, as we will all remember, the Great Recession was in full flower in the aftermath of the Great Credit Crisis and the Great Housing Bust, and the prior month of March had us all experiencing the finale of the Great Stock Market Collapse that came in the wake of the aforementioned-Greats.  Naturally, in April 2009 we did not yet know that the stock markets had reached their lowest point for that pricing cycle, and there was little in the way of positive news to make us feel better about the future.



There's no way to know who is included in the survey, or what the exact responses are, without paying a significant amount of money to be a subscriber to The Conference Board's survey.  It did not touch me, nor did it touch anybody of my acquaintance.  Let's assume that it is a completely valid survey in that it is statistically accurate, it is consistent, and the data-gathering is done in an objective and yet penetrating manner.

The results of the survey, as reported by the Consumer Confidence Index, are simply startling.  Respondents' attitudes about jobs, personal income and business conditions are mostly very negative.  Whoever these surveyed people are, they are certain to be sincere in their responses to whatever questions are being asked.

Now--to play the Devil's Advocate.

These Index results do not jibe with my personal feelings--as a consumer--nor do they seem to be supported by the general impressions of consumer confidence as expressed by others in daily, casual conversations.  Also, it was only yesterday that the big news of the day was the report of an unexpected and significant increase in the most recent tally of consumer spending.  So, in two days, we have two different reports that seem to be in some conflict with each other:  consumers are spending more, but feeling more negative about their future security.  To be fair, The Conference Board, in its press release, provides a caveat that the Index is a "short-term outlook."

For a different approach to this subject, here is my original survey of a consumer's confidence, including the full text of the questions, the responses, and my step-by-step analysis.

Survey sample size:  100% of the available consumer universe (which at the moment is just myself).

Survey methodology:  Ask question; get answer; provide penetrating analysis; compare with something in the past.

Question 1:  Does it seem that the nation's employment picture is better now than it was a month ago, or back in April 2009, or is it worse, or is it about the same?
Answer 1:  Neither I nor anyone in my household is or has been looking for a job, so I cannot give an answer based on first-hand experience.  However, government and private sector job reporting have consistently shown that unemployment benefits claims have been dramatically reduced from the levels during the worst of the Great Recession, and during the same time there has been an increase in private sector jobs.  Unfortunately, during that same period, there have been some huge decreases in State and Local government employment.  It seems that the State and Local employment situation is stabilizing.  Since the job numbers in total have been growing, and that growth is apparently driven by private sector employment, my feeling for the future of employment overall is somewhat positive, even though we definitely need to be creating more jobs than we have been creating.

Question 2:  How do you feel about your future financial security as compared to the way you felt about it a month ago, and as compared to the way you felt about it in April 2009?
Answer 2:  A little bit better now than a month ago, and a whole heck of a lot better than in April 2009.  There are lots of reasons for this, probably too many to go into right now in any detail.  In summary, it comes down to this:  starting late in 2007, the Credit Crisis and the Great Recession and their aftermaths and follow-on events have given us as individuals and as a nation the chance to learn a lot about financial fundamentals.  We all use the stock market as a financial proxy for the health of the nation's economy, and so by that measure there has been tremendous improvement since April 2009.  People seem to be saving more and paying down past debts.  These things are all positive.  I am optimistic and confident.

Question 3:  Does it seem that the outlook for American businesses is better now than it was a month ago, or than it was back in April 2009, or is it worse, or is it about the same?
Answer 3:  OK, you're trying to trip me up with a trick question, aren't you?  Things were really sucky for businesses back in early 2009, and now I hear that things have been so good for the largest corporations that they are currently sitting on a record amount of cash--about $1 trillion that they keep around in their bank accounts here in America, and about $1.4 trillion that they keep in their accounts outside of this country.  The emerging market countries seem to be growing, and the weaker US dollar ought to help our companies to export their goods because it gives them a competitive advantage in pricing.  It's never all that simple, of course, but at least these business leaders do not have to deal with the disadvantage of having the US dollar getting stronger when compared to other currencies in the world and thereby making American products relatively more expensive.  But a big worry for me is the health of the small businesses in this country.  It isn't that I think they are generally unhealthy, but it's just that most of the business news is focused on the big companies, so it's real hard to know what is going on with the smaller ones.

Question 4:  What do you see in the surrounding community that gives some indications about the way other people feel about their financial well being?
Answer 4:  Here's what I see:  Target store -- busy.  Costco store -- busy.  Best Buy store -- busy.  Many other stores -- busy, busy, busy.  Freeways and roads -- busy; it seems like everybody is going somewhere all the time.  Railroads -- lots of freight trains.  Housing -- still has lots of problems, but it seems to be bouncing along a bottom for the last year or so, and maybe will do so for another year or so, but there's no feeling of impending doom like there was back in 2007 and 2008 and into 2009.

Question 5:  Do you feel like the government is making things better, or worse, or not making much difference at all?
Answer 5:  What's with the trick questions?!?  You don't get paid for asking these things, do you?  Look, we talk about the "clowns in government" and some of those people really fit that description.  But for the most part they are just reflections of the people who voted them in because they are either too scared or too unimaginative to be anything else.  So maybe it's we the voters who are the clowns, too.  Anyway, I'm happy with some things that government has done:  health care insurance can no longer deny coverage for preexisting conditions or cancel coverage like they could before 2009; most of the formerly uninsured will end up being covered by health insurance which will help to make them and the people around them healthier in the long run, and there will be less reason for many of those people to use expensive emergency room treatment which just runs up the costs for everybody else; there's lots of work being done on public roads and other infrastructure which means good things for transportation and commerce, and probably fewer expensive front-end alignments for some of us drivers.  And, the USA is exiting from two long-running wars that have been consuming lives, livelihoods (resulting from injuries), money, and our goodwill with other countries.  Not much new is going to come out of government until after the 2012 elections, and that will be a lot of time wasted for making the economy better.  So I suppose we will just have to muddle through until the election sorts things out. 

"Penetrating analysis:"  some things got screwed up a few years ago, it got really bad, let's not do that again, things are better than they were, but nothing goes anywhere in a straight line, and so it's going to take a while longer to get all well again, but at least we can see some progress.  This survey shows that the consumer feels much better about future prospects as of right now than was the case in April 2009, and also shows a small improvement over similar feelings of about a month ago.  (Keep in mind that the sample size is small.)

Comparison with something in the past:  not going to be able to do that in this case, since this is the first time for this survey, and am not able to think of anything else that makes for a relevant comparison.

There will be another survey in another month; can you contain your excitement?