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Newport News, VA 23606


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Consumer Nation: Can Confidence Drive the Economy?

In October 2018, The Conference Board Consumer Confidence Index® reached its highest level since September 2000, despite a steep stock market slide and potential headwinds from inflation and rising interest rates.1 Another measure, the University of Michigan Index of Consumer Sentiment, has also remained higher in 2018 than in any year since 2000.2

Confidence dropped slightly in November, but remained at elevated levels not seen since the boom.3 However, all three major stock market indexes fell into negative territory for the year on November 20.4 So it’s uncertain how long consumers will remain unruffled by market volatility.

Present and Future Conditions

The Consumer Confidence Index is derived from a questionnaire sent each month to more than 3,000 U.S. households. The survey asks consumers to rate current business and employment conditions in their regions and expectations for future conditions (six months hence) for business, employment, and household income. It also asks about plans for major purchases, but these responses are not included in calculating the index.

The University of Michigan Index is derived from three more detailed surveys that go to a smaller set of consumers and ask questions about overall economic conditions, personal finance, and buying intentions.

Some economists consider consumer confidence to be a lagging economic indicator, because consumer attitudes tend to change more slowly than the broader economy. On the other hand, consumer expectations for the future are a leading indicator that may help predict future economic direction.

Jobs and Wages

At the heart of high consumer confidence is a rosy outlook for jobs and wages. The 3.7% unemployment rate in September and October 2018 was the lowest since 1969, and there were a record 7.3 million open jobs in August 2018 — more jobs than unemployed individuals. Wage growth has finally begun to pick up speed, growing at an annual rate of 3.1