Tuesday, March 2, 2010

More Consumer Confusion

A new report released on Monday showed that consumer spending increased in January for the fourth consecutive month. The 0.5 percent increase was larger than both the December number (which had been 0.3 percent) and the consensus analyst estimate. With consumer spending making up a whopping 70 percent of our national economy, this is good news indeed.

It also makes it a bit more puzzling that last week's consumer confidence report, which we noted in passing, was such a downer. Part of the problem is that the confidence report's biggest falloff was in the area of expectations; people reported that they expect things to get worse - again- than they already are. Also, the confidence report covered February, and these more recent numbers are from January; it's possible that consumer confidence nosedived for some reason around the first of February.

In general, though, when you can choose between hard economic data and surveys of people's opinions, go with the facts. It's instructive to know the consumer mind-set, which is a key factor in why the economy behaves as it does. But you can always trust what people do more than what they say, especially in their economic behavior.

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