I was listening to a story the other day on my local NPR affiliate (yes, I'm one of those) and I heard something completely astonishing. The story itself wasn't so surprising. Consumer confidence is at a five-year high.
But what they said next completely blew my mind.
The article said that consumer spending makes up 66% of our nation's spending.
You guys . . . this is incredible. My mind immediately went two places:
- We the consumers are so, so powerful, and every decision we make about where our money goes matters on a little-d democratic level.
- I should make something!
I mentioned this story to a friend of mine, who has an MBA, so he wasn't as surprised. That makes sense. People in business school, presumably, learn about consumers and consumer behavior (back me up, here, Robert!). He told me American consumers spend tens of trillions of dollars, annually.
Consumer confidence, evidently, can be measured. And, who knew, The Conference Board in DC is the body that sends the survey that measures it!
Why Consumer Confidence Matters
I'm not sure why, but I can't get it out of my head — this concept of consumer confidence.
It's basically a measurement of how willing we are to part with our hard-earned money. When we feel more flush, we are more willing to spend. So, when consumer confidence reaches a record high, what that means is that we think we can spend our money. So we do, which fuels the economy (hello ten trillion dollars!), which gives us more confidence . . . .
The cycle continues. Good things go our way. We don't save as much as we did when we were more worried. We take bigger risks with our investments — until the wind changes direction.
Then, we're back where we started . . . or worse. We've over-financed ourselves, we have too many mortgages, and our income trajectory didn't quite pan out the way we thought it would.
I know it's much more complicated, but it seems to me that this is a self-fulfilling prophecy.
We the consumers are so, so powerful.
The marketing people are really good at their jobs, too. They make it seem like we can afford anything. “Just x small payments,” we hear. We're crows, getting distracted by the shiny objects.
I wonder if we're measuring the wrong thing.
Confidence? That's so easily lost. Is it a meaningful measurement? Maybe. But it seems to be missing something.
My Consumer Confidence Level
I suppose my problem exists here: My consumer confidence peaked several years ago and it had nothing in the way of logic (or income) to back it up. So, in my experience, confidence, and financial literacy have zero overlap in the Venn diagram!
So, it makes me wonder . . . does consumer confidence measure our foolishness as a country? And, if so, is it bad news that it's the highest it's been in five years?