http://www.forbes.com/feeds/ap/2009/12/29/personal-finance-us-economy_7242154.html
The article focuses on the consumer confidence index, which is an important indicator of the American economy since consumer spending on goods and services accounts for over two-thirds of U.S. economic activity. Measuring consumers' opinions plays an essential role for economists in their attempt to gauge consumers' future spending tendency and hence to determine the country's economic condition.
The consumer confidence index rose for two consecutive months to 52.9 in December, from a revised 50.6 in November. Although the current index is still far lower than 90 which indicates a solid and healthy economy, there has been a noticeable improvement in consumer confidence since February, at which point the index hit a record low of 25.3. This means that the economy is recovering, or at least on the right track. However, it is clear that the recovery is still weak and most people are still very cautious with their spending plans due to the poor prospect of the job market. The current increase in the index might merely be attributed the big shopping occasions occurring at the end of last years. Many items on discount during the period between Thanksgiving and Christmas might be the source of increasing consumer spending. If this is true, the improvement in the index is just temporary.
The end of the year is the time that sales rise up. Indeed, I am not surprise if consumer confidence index goes up. Indeed, consumer confidence index has gradually increased since October 2009. To have a better conclusion, I think we need to wait for the index this month. Besides, I want to add up a few things. Consumer confidence index (CCI) measures the consumer confidence or the degree of optimism that consumers are willing to spend their money. Normally, people choose base year is 1985 with CCI = 100. After the last recession in 2001, CCI can reach its peak at 144.7
ReplyDeleteFinally, I think we have passed the trough; the economy is recovering gradually.
I think the improvement in consumer confidence index is indeed temporary. According to the article I posted earlier, the economy is now in a trap of long-term unemployment and it leads to household indebtedness problem. Although the index improved a little now, it is still pretty low comprared with the index in a healty economy. With a problem of unemployment, consumers do not have more income than before, so they will not consume more.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteWe can clearly see a close relationship between the unemployment rate and the consumer confidence index, which predicts the consumption. If the unemployment rate continues to drop, more people will lose their jobs, and cases like the lady returning bought clothes won't be rare. In my opinion, the CCI may even drop again in the future, and it probably won't return to the normal healthy 90 soon.
ReplyDeleteI don't think there is any reason for us to believe the CCI is going to increase permanently until we fix the ongoing crisis in our economy. Sure we are seeing minor improvements in the stock market and housing markets, but we still have a monumental credit crisis on our hands. With many average households behind on two or more cards the idea of American's hoping for the economy as a whole to right itself is absurd. The government is currently introducing lots of legislation to help people dealing with credit card debts but it still is going to take a long time to climb out of such a deep hole.
ReplyDeleteI agree- I don't think we should get our hopes up with the increase in CCI. Historically, during the holiday season the CCI tends to be slightly higher anyway. The CCI is just one small indicator of a much broader recession. The unemployment rate, housing market, and credit crisis are much bigger issues that still need to be improved. The number of foreclosures in this country is absolutely astounding, a record of 2.8 million in 2009, despite the aid of the government.
ReplyDelete