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Behind the Recent ‘Rise’ in Consumer Confidence

Aug 28th, 2008 | By Contrarian Profits | Category: Politics & Economics

U.S. consumer confidence is on the mend, we are told. The Conference Board Consumer Confidence Index rose to 56.9 for August from a revised 51.9 in July. This was a higher jump than forecast. The only problem is on the same day that the Conference Board came out with its jaunty view of the collective mind of American shoppers, ABC News spoiled the party by telling us that consumer confidence was at a record low for the week.

The ABC News Consumer Comfort Index edged down to -50 in the week to Aug. 24 from -49 in the previous week.

If consumer confidence is improving - if such survey’s are worth a damn, that is; we suspect they are not - the obvious reason for the improved mood is a drop in the national average for gas prices. This now stands at $3.66.

Addison Wiggan and Ian Mathias in Agora Financial’s 5 Min. Forecast think differently. The truth, say Addison and Ian, is the jump in the Conference Board’s numbers probably has more to do with skyrocking household debt. (See chart below.)

U.S. household debt

This from yesterday’s 5…

U.S. households now hold more debt than the entire U.S. economy produces in goods and services each year,” say Addison and Ian. Debt, like heroin, makes things seem a whole lot more euphoric than they realy are. Unfortunately, you need an ever larger amount to keep the high going.


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