Amid the constant turmoil in domestic and global politics these days, the economy’s steady expansion has been a source of comfort. But look more closely and you will find that economic growth rests on a surprisingly amorphous base: consumer confidence.
In the United States, consumer confidence has been ascending since 2009. What’s more, the domestic data have been synchronized to a remarkable degree with similar metrics from around the world.
We know that consumer confidence is a critically important advance indicator of economic booms and busts. At the moment, it is forecasting a continuing expansion. Yet the troubling fact is that we don’t fully understand how and why consumer confidence acts as it does.
Since 2009, there have been ups and downs in consumer confidence lasting months, but those downward swings have not interrupted the long uptrend in the United States. This pattern has held for all four major American indexes: the University of Michigan’s consumer sentiment survey, the Conference Board’s consumer confidence index, the Bloomberg Consumer Comfort Index, and the Organization for Economic Cooperation and Development’s consumer confidence index.
Some recent readings have been a bit weak, but we have seen such minor shifts many times since 2009 and they haven’t meant much. Even the recent shutdown of the United States government — and the prospect of further political conflict — may not matter for this metric. When the government shut down briefly in October 2013, there was a temporary drop in confidence, but that didn’t stop the longer-run rise.
