According to the University of Michigan study from March, the Consumer Confidence Index dipped lower than expected this month. The CCI reached around 90 when expectations were around 92.2 which is even a decrease from earlier this year from February which had a CCI of 105.6 down from 106.8. The University of Michigan provides this index number on a monthly basis which can give economists a key insight into the way that consumers feel about the current state of the economy. One main aspect and driving force of consumer behavior are expectations. This idea can take the form of anything from prices of commodities domestically to the overall inflation rate of the economy. Usually, people and companies pay very close attention to the words and actions of the Fed and act after they have made their assumptions. Similarly, consumer actions and consumer spending have a very large impact on the GDP of our nation (around 70%), and when they are feeling confident, they spend more which promotes the growth of industries and aids in productivity and wage growth.
Currently, the article written by Anita Balakrishnan, claims that consumer confidence fell due to concern over increasing gasoline prices. Over this year, gas prices have been historically low from the over supply and abundance, and during that time, consumers relished in the cheap prices, however, with prices rising, they probably worry about what is to come. The article does mention, on the other hand, that consumers do not necessarily think that there will be another recession in the near future, but that the GDP could potentially slow to a growth below 2.4% which would stifle productivity and output.
link:http://www.cnbc.com/2016/03/18/university-of-michigan-reports-preliminary-consumer-sentiment-for-march-2016.html
This article is very interesting because it discusses a real life example of what we learned in Principles of Economics: consumer confidence index, its determinants and the relation of CCI to GDP. Furthermore, it is startling to see that they predict the GDP will potentially slip to below 2.4%. Hopefully, the we are able to avoid that decrease and continue to grow as a nation
ReplyDeleteI think its interesting that consumer's are behaving differently because of the gas prices since the gas prices aren't nearly as high as they have been in past years.
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