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November 26, 2007

Wrong Again on Consumer Confidence, Whatever That Is


You. What’s the matter with you? You are defying expert analysis. Stop it!


Few recent news leads have been more hilarious than this one from Agence France Presse this past Saturday (emphasis mine):


Shoppers in the United States brushed off some gloomy economic forecasts and rushed into stores during the Thanksgiving Day weekend, kicking off one of the busiest US shopping periods of the year.


While economists have suggested this year's holiday season will likely see only a small increase in takings over last year due to weak consumer confidence, there was little sign of depressed sales on New York's streets.


So let me see if I have this straight. The economists predicted that sales would be slow because the consumers are lacking confidence. The consumers, apparently not having received the memo about their own sense of doom and gloom, rush into the stores, thus acting inconsistently with expert-proscribed behavior.


In other words, when the economists declared the consumers to be lacking confidence, they apparently had not actually checked with any consumers, and instead were pulling that little bit of analysis out of their butts. They had no concept whatsoever of the mindset of consumers.


Glad to have cleared that up.


Consumer confidence is one of the most imprecise – to put it kindly – of all economic measures. One “index” of consumer confidence comes from Reuters and the University of Michigan, which prior to Friday’s big sales performance had pegged consumer confidence at 75.


Seventy-five what, you ask? That’s a silly question. No one knows. This time a year ago, U of M announced that consumer sentiment was 85.4. Last year they said consumers were happier because gas prices were falling. This year they say consumers are surlier because gas prices are rising.


Do you see a pattern here? They’re wasting their time doing research. They should just drive around to gas stations, see if the prices have gone up and down, and then make their guess.


Then they could get to the really important stuff, which is practicing the look of surprise on their faces when consumers inevitably don’t behave as the vaunted consumer confidence index says they are supposed to.


The so-called “Black Friday,” which is the day after Thanksgiving and the day America’s retailers expect to finally break into the black on their P&L statements, is a perfect example. Whether or not someone gets up at 2:30 in the morning and gets ready to go shopping has nothing to do with how confident he or she is. (Who am I kidding? It has nothing to do with how confident she is.)


It has to do with how sane she is. Or isn’t. I’m not saying you have to be crazy to get up at 2:30 a.m. But if you get up at 2:30 a.m. to go shopping, you are crazy. The store will be open all day. Is half off some piece of crap really worth the loss of sleep? And what about that 800-calorie, $10 “Cinnabon” you will buy at the mall? And the $4 Starbuck’s coffee, when you could have had a cup of Folgers at home that was in your pantry anyway.


If consumer spending ever ticks downward in this country, it will have nothing to do with consumer confidence. It will probably have to do with the fact that everyone in America wakes up one day and realizes that they have every piece of junk they could ever conceivably find room for, and there is simply nothing left to buy.


Hey, you have to be pretty confident to stay home and sleep in on the day when everyone tells you that you’re supposed to be shopping in the wee hours of the morning. Of course, if I were running the country, you’d have to go to work on that day, in which case you’d be earning money instead of spending it.


That would boggle the economists’ minds. But they’d come up with a way to measure it, then pull a number out of their butts and announce it to everyone. Just like they always do.


© 2007 North Star Writers Group. May not be republished without permission.


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