Consumer Confidence Takes a Dramatic Hit; What This Means for Eco
When it comes to forecasting economic growth, one has to pay close attention to consumer confidence. For developed nations, domestic spending makes up a large portion of an economy. If consumer confidence becomes troubled, this will certainly impact economic growth going forward.
Recently released data from Thomson Reuters/University of Michigan and their consumer sentiment index shows a decrease to 74.5 for December, as opposed to an estimated reading of 82 from a survey conducted by Bloomberg. November’s reading for consumer confidence was 82.7. The decrease in consumer confidence was the weakest in four months. (Source: “Michigan Consumer Sentiment Declines More Than Forecast,” Bloomberg, December 7, 2012.)
While economic growth has been weak for most of 2012, spending by consumers was relatively strong. However, I believe the increased discussion regarding the fiscal cliff issue and the constant bickering and ineptitude of politicians in averting drastic changes to fiscal policy is now weighing down consumer confidence. This increased awareness of the potential for a massive decrease in economic growth in 2013 will certainly continue to weigh down consumer confidence.