Consumer Confidence Falling Is No Big Deal

This morning the Conference Board reported that March consumer confidence fell to 63.4 from February’s (revised upward) level of 72.0.

Analysis: This result had to be expected given the uncertainty generated by the crises in both the Middle East and Japan, as well as the resulting increase in prices of consumer goods, especially gas.  However, the good news is that March’s 63.4 reading is the same as it was three months ago.  Now that folks are starting to gain comfort with what has happened and is happening in the Middle East and Japan, their confidence will start to rise again.

You can boil people with bad news if you turn up the heat slowly, but do not just drop them in the bad news pot.  If the onset of very bad news is slow people actually prefer this to just mildly bad news that happens rapidly.  Assuming that there are not any greater global catastrophes taking place in the next 30 days, people will start to recover their confidence.  As I reported yesterday consumer spending was robust in March despite the gloomy mood of the consumer.  So my expectation is that there is a minimal affect on gross domestic product (GDP) from the decline in consumer confidence.

Importance grade: 5; normally such a dramatic fall in consumer confidence would warrant a higher importance grade.  However, it’s my feeling that this is a one time blip.  In yesterday’s post I highlighted the fact that had the current geopolitical situation unfolded last year the economy would have experienced a double-dip recession.  Not so this year.

Jason