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December 09, 2005

Can't Fight The Cowbell: Consumer Confidence, Optimism For Future Rises

Although I'm pretty sure the media wants to keep the Dick-Cheney-esque economy a secret, there's only so much they can do. Stories have momentum, and at some point that momentum may become irresistable -- sparking a rash of "economic boom" stories which furthers the momentum (and also further increases public confidence and optimism).

Even the French polling firm IPSOS reports growing confidence.

The RBC CASH Index, based on polling by Ipsos, showed that consumer confidence clocked in at 85.5 in December, the second-highest reading of this year.

The pickup builds upon the rebound in consumer confidence staged in November, when the index jumped to 81. That revival came after confidence had been stuck in the doldrums in September and October, reflecting worries about sky-high energy prices and other fallout from the Gulf Coast hurricanes.

Economists attributed the December improvement to a retreat in gasoline prices, a ramp up in hiring and solid growth being logged by the overall economy.


At present "consumers are cautiously optimistic," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group.


The biggest over-the-month improvement came from a measure looking at consumers' economic expectations over the next six months, including conditions where they live or work and their own financial positions.

That expectations measure rose to 53.9 in December, up from 44.5 in November.

So much of the economy is dependent on psychology. You don't hire new workers, or invest capital, or even spend a lot at Christmas if you imagine there's a recession on the horizon. It's pretty impressive that hiring and growth and spending are as high as they are given that 43% of all Americans think we're in a recession.

What happens when they stop thinking that?

This isn't entirely a media conspiracy (although they're doing their darnedest to conspire away). Objective economic guages were fairly strong (or at least decent, and suggesting reason for hopefulness) at the end of Bush I's term and into the first 18 months of Clinton's first term, and yet I remember the MSM, and the public generally, being pretty dour as regards the economy. Eventually, of course, it began to register we were in a period of strong growth, and then the economy exploded.

Public perceptions are the third-most lagging indicator of an economy's strength. Media perceptions are the second-most lagging indicator, and media perceptions during a Republican administration are the most lagging indicator of all.

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posted by Ace at 11:49 AM

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