Sunday, October 3, 2010
Consumer Pessimism is Plumbing New Depths
Pessimism was higher during the Great Recession than it's been in the past 45 years. Consumer confidence fell, and it was due to lower expectations than what actually happened. Expectations about business conditions, job amounts, and income were more negative than positive. This was the first time since July 2009 that there were more negative than positive responses. This recession caused pessimism about people's own specific incomes, not just the economy as a whole. Pessimism has been above 15 percent for the past 2 years, when it hasn't been even near 15% before the recession. Most of the pessimism was caused by the large increase in unemployment.
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As we know from our study of the effects of inflation expectation, whether or not it actually happens, expectation plays a huge role on the present. Unfortunately, even if things do begin to shape up in regards to the economy, the economy still may remain stagnant due to negative expectations.
ReplyDeleteThis article is very interesting because it focuses on more of a physiological analysis of the economy. With expectations as low as they are in the recession, unemployment numbers may not change due to the overall productiveness of the economy.
ReplyDeleteIt is interesting to see what we learn in class actually play a part in reality. It is crazy that people can cause shifts in prices and other factors of the economy just because they believe something will happen. I found the article very interesting, and it's view on the public's mindset was different but enjoyable.
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