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Economy
U.S. Economic Confidence Declining in Late May
Economy

U.S. Economic Confidence Declining in Late May

by Dennis Jacobe

PRINCETON, NJ -- Â鶹´«Ã½AV's Economic Confidence Index worsened by five points during the week ending May 23, suggesting that Tuesday's Conference Board report indicating that consumer confidence increased in May is already out of date. While economic confidence improved in late April and early May -- most likely in response to the recent better job numbers -- Â鶹´«Ã½AV's daily monitoring of economic confidence documents deterioration last week. This likely reflects fallout from the European financial crisis manifested in the declining U.S. stock market, and not included in Tuesday's consumer confidence report.

Economic Confidence, Weekly Averages, March-May 2010

Rolling three-day averages of Â鶹´«Ã½AV's Index , reflecting a quick decline in economic confidence as concerns grow over how the European Union's financial crisis and declines on Wall Street may soon affect the U.S. economy.

Economic Confidence Index, Daily Averages, May 2010

"Poor" Ratings of U.S. Economy Highest Since March

Forty-seven percent of consumers rated the current condition of the U.S. economy as "poor" during the most recent week -- up four points from the prior week and the highest percentage in two months.

Ratings of Current Economic Conditions, Weekly Averages, March-May 2010

Economic Outlook Deteriorating After Steady April, Early May

Fifty-seven percent of consumers told Â鶹´«Ã½AV economic conditions are "getting worse" in the country as a whole during the past week. This is up three points from the prior week, and the highest such percentage since the week ending March 28.

Future Economic Expectations, Weekly Averages, March-May 2010

Days Matter When Measuring This Economy

As the stock market plunged early Tuesday morning, some on Wall Street cheered the release of a new report showing U.S. consumer confidence increasing in May. The rationale for the increase was that an improving job market has consumers feeling more optimistic. All of this makes sense when one recognizes that the Conference Board's mail survey largely reflects the first part of May.

However, putting too much faith in the Conference Board report ignores how consumers have reacted even more recently to the recent financial turmoil in Europe and the stock market slump. While international financial events may seem too far away to cause many Americans a great deal of concern, plunging U.S. financial markets are an effective transmission system -- particularly when they are transmitting fear. Â鶹´«Ã½AV's daily monitoring shows that consumers are not ignoring what has been happening on Wall Street; current consumer confidence measures that report their findings once a month can miss such fluctuations, and suddenly be out of date.

On Friday, the Reuters/University of Michigan consumer sentiment index will be released. This is a small telephone survey with about half of its sample collected during the first half of each month. As a result, it may not show the sharp improvement in consumer confidence reported Tuesday, but could also be out of date because it is a monthly measure.

All told, current consumer and investor psychology is extremely fragile. Memories of late 2008 and early 2009 are still fresh in consumers' minds. As a result, fear and volatility on Wall Street can quickly create concern on Main Street. In such an environment, it is even more perilous for markets to react and decisions to be made on the basis of out-of-date economic measures.

Â鶹´«Ã½AV.com reports results from these indexes in daily, weekly, and monthly averages and in Â鶹´«Ã½AV.com stories. Complete trend data are always available to view and export in the following charts:

Daily: , ,

Weekly: , , ,

about Â鶹´«Ã½AV's economic measures.

Survey Methods

For Â鶹´«Ã½AV Daily tracking, Â鶹´«Ã½AV interviews approximately 1,000 national adults, aged 18 and older, each day. The Â鶹´«Ã½AV economic confidence results are based on random half-samples of approximately 500 national adults, aged 18 and older, each day. Weekly results are based on telephone interviews with approximately 3,000 adults. For these results, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage point.

Interviews are conducted with respondents on landline telephones (for respondents with a landline telephone) and cellular phones (for respondents who are cell phone only).

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.


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