‘The world’s most useless economic statistic’
Bloomberg reports that U.S. consumer confidence is almost back to pre-recession levels. But is that actually good news? Over at the Big Picture, James Bianco says it’s not clear why “consumer confidence” is a useful metric. It’s not correlated with jobs. Or retail sales. Or anything except recent stock-market headlines:
Respondents don’t really know how to answer such abstract questions as business and employment conditions, so they describe what they think is the ultimate economic indicator, the stock market’s recent movements. While spikes in gas prices or other economic events (i.e., 9/11, “The Great Recession”) will supersede this method at times, most of the time the stock market is used. . .In the last few months the stock market is up strongly, so it should not be a surprise that consumer confidence is up as well.
Since we already have fairly reliable methods of figuring out what the stock market has been doing of late, do we need consumer confidence too?