Consumer Confidence

An early advance fizzled on Wall Street Friday after a consumer sentiment reading fell to its lowest level in more than 25 years and a disappointing forecast from Microsoft Corp. weighed on technology issues.

How does consumer confidence effect our economy? The Consumer confidence level is hoe people respond to events such as sharemarket, oil prices, increase in interest rates etc.

To understand more about the Consumer Confidence Index, an online encyclopedia tell us: “A month-on-month decreasing trend suggests consumers have a negative outlook on their ability to secure and retain good jobs. Thus, manufacturers may expect consumers to avoid retail purchases, particularly large-ticket items that require financing. Manufacturers may pare down inventories to reduce overhead and/or delay investing in new projects and facilities. Likewise, banks can anticipate a decrease in lending activity, mortgage applications and credit card use. When faced with a down-trending index, the government has a variety of options, such as issuing a tax rebate or taking other fiscal or monetary action to stimulate the economy.

Conversely, a rising trend in consumer confidence indicates improvements in consumer buying patterns. Manufacturers can increase production and hiring. Banks can expect increased demand for credit. Builders can prepare for a rise in home construction and government can anticipate improved tax revenues based on the increase in consumer spending.”