This article takes a look into how consumer confidence has played a large role in the US economy's recent expansion. Consumer confidence in the US has risen since the recession in 2008. It was interesting to note that the article mentioned that consumer confidence levels are forecasted to increase in the upcoming year as well. This was tough to believe for me, mainly because of how long we have experienced a bull market. Because of this and the knowledge we have of business cycles, I would expect consumer confidence to decrease at some point in the near future.
It was good to see that the article mentioned that consumer confidence is not the only factor that plays a role in economic growth. I feel that consumer confidence is a good indicator of how the economy will change in the future, but sometimes can be misleading. The author referred to John Maynard Keynes' use of the term "animal spirits," which causes consumers to be overly optimistic in economic decision making. This can potentially be true with respect to the growth of the S&P 500 as of recent.
Overall, this article was really intriguing to see how important consumer confidence really is when it comes to economic growth. The article definitely makes you question how long the trend of economic growth and increasing consumer confidence will last.
https://www.nytimes.com/2018/01/26/business/consumer-confidence-lifting-economy.html
2 comments:
I would agree with the article in that the economy has the possibility of trending downward and we don't know when, but chances are, it won't happen in the foreseeable future. This past holiday season was the best (in terms of consumer spending) in the last 12 years, showing the consumers do have confidence the economy will remain on an upward trend. Add in the tax cuts that increase consumers' disposable income, consumers have more financial freedom to do as they wish, so the economy can rest on this indicator for the next few quarters, and maybe even years.
I agree with Adam. We really don't know exactly what will happen in the future. But as Adam said also they have much more financial freedom which will hopefully help the economy in the near future.
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