Cars are rolling off dealers' lots and sales of homes are buzzing along. Consumer confidence, i.e., the way Americans feel about the economy and their financial health, is critical because their spending accounts for two-thirds of the nation's gross domestic product. U.S. household spending is forecast to grow by 2 to 3 percent this year. While consumer confidence slid in April, the Conference Board, which surveys 5,000 U.S. households, says its index was not near levels seen prior to a recession. Probably not, says Bill Valentine, president of Valentine Ventures LLC, an investment management firm, but first let's look at what these consumer confidence surveys really reflect.
Consumer confidence is simply a reflection of what the mass media are telling people.
In February, consumer confidence slipped at a slower rate as some 10,600 articles were reported on the recession, a drop of 17 percent from a month earlier. But by March, consumers felt less scared or perhaps bored about all of that recession talk as the number of articles on the subject was up only 6 percent from February to 11,300. Still the jobs market appears to be turning uglier and the risk is that if people lose their jobs, they will curtail their buying habits in a New York minute. After an eight-year expansion in which 21 million jobs were created, the U.S. economy lost jobs 223,000 jobs in April and the jobless rate climbed to 4.5 percent from 4.3 percent in March. Companies announced 165,564 new layoffs compared with 162,867 in March.