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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
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.
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
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
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
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.
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