by Phil Yacuboski
In November 2017, consumer confidence hit a high. On its index, it hit 129.5, a number that is already higher than numbers in the previous months.
The last time it hit these types of highs, it was November of 2000, when it 132.6.
“We have gone through a cycle,” said Dr. Abhijit Roy, professor of marketing at the University of Scranton. “During the past year, the number has been steadily rising during the first year of the Trump presidency. People feel good.”
The consumer confidence index takes into account consumers’ views on the economy and what they expect in the next six months. The index is a sample of about 5,000 randomly chosen households in the United States done by The Conference Board for the past 60 years.
The number is based on a number of factors, including wages and employment.
“It’s also a reflection of how the stock market is doing and the stock market is at its all-time high,” he said. “People feel that it’s easier to find a job and inflation is in check.”
“When consumers are optimistic, businesses are more optimistic,” said Mike Trebing, a senior economic analyst, at the Federal Reserve Bank of Philadelphia. “Businesses are then more optimistic about hiring.”
He said the consumer confidence index is both volatile and fickle. Trebing said economists typically look at the Michigan Survey and the Survey of Consumer Expectations in New York to make a determination about consumer confidence.
“The fed is interested in these (consumer confidence) numbers because we’re always trying to know why people are not in the job market and this number indicates people are optimistic about employment,” he said. “We’re hearing from more and more businesses that it’s getting harder and harder to find qualified people, so that’s all positive news, especially when it comes to employment numbers.”
Mastercard SpendingPulse estimated that the 2017 holiday shopping season will be the strongest since 2010.
“The composition of spending has changed so much between online sales and retail, so it will be difficult to tell what the impact will be,” he said.
Trebing said the economy in northeastern Pennsylvania will no doubt see a bump from the overall economy doing better.
“The regions around it are doing better,” he said. “New York, Philadelphia and New Jersey are all doing better.”
He said recent numbers show that warehousing and manufacturing are up in those regions, which means a positive impact on northeast region.
Dr. Roy said he’s not surprised that the numbers are this high.
“The economy is doing well and people are doing good,” he said. “This is how it felt in 2008, when the market was going up and then everything crashed in a span of six to nine months. Things can fall pretty fast. I certainly don’t want to see that happens.”
Some argue it’s the so-called ‘wealth effect’ that is sending consumer confidence so high.
“People are willing to spend more money because of the additional funds in stock market accounts,” said Chip Baumgardner, an associate professor of business administration at Penn College of Technology. “There is a similar benefit for individuals seeking to cash in on various retirement plans. An individual holding $500,000 in retirement funds could easily see an additional increase of $100,000 during 2017.”
He, too, said much of The Conference Board’s estimate is tied to employment figures.
“Even for those who are underemployed or left the labor market, things as starting to look much better,” he said. “This should create an increase in the rather flat wage rates of the past decade.”
Baumgardner said he believes that Pennsylvania’s economy moves with the national economy in general, so he expects the numbers to be similar in this part of the state.