Tuesday, August 30, 2011

Drastic Drop

The Lehmann Letter (SM)

This morning The Conference Board reported that its index of consumer confidence fell to 44.5 in August from 59.2 in July:


It could be that August's debt-ceiling imbroglio was a major factor and that confidence will bounce back up in September with the settlement of that issue. We'll see.

Consumer Confidence

(Click on chart to enlarge.)

Recessions shaded

But you can see for yourself that the latest reading presents a sharp setback. Consumer confidence is not growing.

It's true that there is noise in the data. Consumer confidence can vary sharply from month to month. That reduces its accuracy as a short-term forecast of economic conditions.

By taking another look at the chart, however, you can also see that the general direction of consumer confidence has been a good leading indicator for many recessions. It's hard to imagine a robust economy if this important indicator remains in the doldrums.

(The chart was taken from http://www.beyourowneconomist.com. Enroll for additional charts on the economy and a list and calendar of economic indicators.)

© 2011 Michael B. Lehmann

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