Economic Indicators: Consumer and Business Confidence

BY Brian Loftus
4/20/2020 - HVAC Market Intelligence , COVID-19

Consumer Confidence is my favorite economic indicator because it reflects events in our history, and because it captures so much in one number.  This number reflects the employment situation, the ability or willingness to invest in homes, and the enthusiasm of customers that inspires business investment. 

The blue line in the chart above is Consumer Sentiment by the University of Michigan.  They have been doing this since the early 1950s.  This is usually referred to as Consumer Confidence and is what former Fed Chair Janet Yellen recommends that we monitor.  It spikes down during times of fear,  like now, and it will illustrate the shape of our recovery, whether we will have a U shaped recovery like you see from late 2006 through 2009, or like so many other times, where recovery has exhibited a V shape.   The lower this index goes, the longer this recession will last.

Consumers are considered very confident when the index is 90 or higher as it has been for most of the past five years.  The index began to reflect the COVID-19 shutdown in March when the index dropped to 89 from 101 in February.  “The extent of additional declines in April will depend on the success in curtailing the spread of the virus and how quickly households receive funds to relieve their financial hardships. Mitigating the negative impacts on health and finances may curb rising pessimism, but it will not produce optimism,” said Richard Curtin, Surveys of Consumers chief economist.


We are also monitoring Small Business Confidence at the national and regional level by the National Federation of Independent Business.  Other survey responses they are gathering for us include hiring intentions and general economic outlook.  NFIB began compiling this information in the 1980s and we will share it with members through our HARDInomics reports.

The blue lines in the graphs show us that threats to personal and economic survival tend to alter priorities and drain our optimism.  The first step to these blue lines finding a bottom will be fewer deaths per day and shorter lines at local food pantries.  Given past experience with coronavirus, warmer weather on the horizon and the global quest for remedies, we believe these blue lines will bounce from “frightened” territories and our economy will follow.  We are eagerly tracking a variety of state and local metrics to keep you informed of the prospects.

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