Consumers Feeling a Bit More Confident

By SBE Council at 28 September, 2022, 8:40 am

by Raymond J. Keating – 

The latest report on consumer confidence from the Conference Board indicates that consumers were feeling a bit more confident in September.

For the second month in a row, consumer confidence moved in a positive direction. As the Conference Board explained:

“The Index now stands at 108.0 (1985=100), up from 103.6 in August. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—rose to 149.6 from 145.3 last month. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—increased to 80.3 from 75.8.”

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, observed, “The Present Situation Index rose again, after declining from April through July. The Expectations Index also improved from summer lows, but recession risks nonetheless persist. Concerns about inflation dissipated further in September—prompted largely by declining prices at the gas pump—and are now at their lowest level since the start of the year… Looking ahead, the improvement in confidence may bode well for consumer spending in the final months of 2022, but inflation and interest-rate hikes remain strong headwinds to growth in the short term.”

Consumer confidence measures are one factor among many more that one can use to try to get a feel for where the economy is headed. But it always needs to be kept in mind that while consumers receive a great deal of attention regarding the state of the economy, they actually are followers. They take their cues largely from what business is doing. That is, is business investing, expanding and hiring? Are entrepreneurs starting up new businesses? And what’s lies ahead on these fronts?

In turn, entrepreneurs, businesses and investors are affected by what government is doing. That is, are politicians raising the costs of starting up, building and investing in businesses, or are they reducing such costs, and thereby boosting both the resources available and incentives for undertaking such crucial activities?

Unfortunately, in order to boost economic, income and employment growth, the private sector currently is hampered by having to fight off misguided tax, regulatory, trade, government spending and monetary policymaking.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.