Nobel laureate and noted economist Paul Krugman has expressed skepticism over the upbeat consumer confidence data released in late December.
The Expectations Index—based on consumers' short-term outlook for income, business, and labor market conditions—rose to 82.4 from 76.7. Krugman pointed out that although it is a commonly known fact the economy is in trouble, the public seems to have shrugged it off, according to the survey results.
“As 2022 winds down, everyone knows that the economy is in terrible shape — everyone except the public, according to the Conference Board Survey,” the economist tweeted in the last week of December.
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Consumer confidence surged to an eight month high in December following a drop in inflation and the labor market remaining strong. Major Wall Street indices soared on Wednesday and closed over 1.5%. The SPDR S&P 500 ETF Trust SPY closed 1.5% higher while the Vanguard Total Bond Market Index Fund ETF BND rose 0.23%.
Outlook: Consumers were less pessimistic about the short-term business conditions outlook in December and were more upbeat about the short-term labor market outlook.
Lynn Franco, Senior Director of Economic Indicators at The Conference Board said the Present Situation and Expectations Indexes improved due to consumers' more favorable view regarding the economy and jobs.
“Inflation expectations retreated in December to their lowest level since September 2021, with recent declines in gas prices a major impetus. Vacation intentions improved but plans to purchase homes and big-ticket appliances cooled further. This shift in consumers' preference from big-ticket items to services will continue in 2023, as will headwinds from inflation and interest rate hikes," Franco said.
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This story was originally published on Dec. 22, 2022 and has been republished with some updates.
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