It's said that perception is reality, and that can be true. It can even be a self-fulfilling prophecy when it comes to the economy. When people think the economy is doing poorly, they may slow down consumer spending (70 percent of economic activity), which can lead to a downturn.
But a strange thing happened on the way from the covid economy to something that resembles normal. For months, while a majority of Americans believed the economy was in bad shape, a majority also thought their personal financial conditions were good. It's an equation that doesn't add up.
However, something that does add up is an uptick in consumer confidence, which has led to record holiday spending.
Last week, the Conference Board, a business research group, said that its consumer confidence index rose to 102 in November from 99.1 in October.
What do those numbers mean? We're grateful to answer: We don't know. But obviously, the higher the better.
"General improvements were seen across the spectrum of income groups surveyed in November," said Dana Peterson, chief economist at the Conference Board. It's not all good news. "Consumers remain preoccupied with rising prices in general, followed by war/conflicts and higher interest rates."
However, the survey also showed that Americans' expectation of a recession in the next 12 months is at its lowest level so far this year. Still, about two-thirds of those surveyed expect a downturn before the end of 2024.
All of this translates, at least in the short term, to a Business Section headline last week that read "Shoppers set record for holiday sales."
Yep, a record 200 million (out of 340 million) people shopped over the five-day period between Thanksgiving and Cyber Monday.
Shoppers who braved the traffic and parking fights to go see and feel products totaled 76 million compared to 73 million in 2022. Those who shopped from the comfort of their couches and presumably splitting time between football and basketball on TV were "roughly 90.6 million ... up from 87.2 million in 2022," the trade group said.
Saturday shoppers dropped off slightly, but were still on par with last year, much of it owed to "Small Business Saturday" sales and promotions.
While this is good news, it would be difficult to say the U.S. consumer has not suffered from inflation over the past few years. But the perception that it's still bad, or getting worse, doesn't match up with reality.