Confidence and Expectations
Is the bad economic news reaching into our consciousness? Are we being more glass-half-full or glass-half-empty?
JUL 15, 2022
Recession and the related downturn for the market is part economics, part the psychology, the way people react in facing the economics. Consumers think twice about discretionary purchases. Producers hunker down, hold less inventory and put off capital expenditures.
So let’s look beyond the numbers and see if that bad news reaching into our consciousness? Are we being more glass-half-full, or glass-half-empty?
A number of surveys of consumer and business confidence are in major red line territory. Below, I’ve cherrypicked two of the worst, but even the more optimistic are either bad or on the downtrend.
As can be seen by this chart, the University of Michigan Consumer Sentiment Survey is at the lowest level since 1980.
There are worse times if we go back to the 1970s, but the methods and frequency of the survey were different then. (And of course it is more dramatic to stop while what we currently show is the worse. 😃) Interestingly, but not surprisingly, the low points coincide with three recessions over this period: 1980, 1991, and 2008.
Looking at business confidence and expectations, it is the same story. The Conference Board’s Business Expectations Survey is lower than it has been at any time other than for these same three recessions.
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CO-FOUNDER AND HEAD OF RISK
Rick Bookstaber has held chief risk officer roles at major institutions, most recently the pension and endowment of the University of California. He holds a Ph.D. from MIT.