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Consumer Confidence Plunges. And?

The University of Michigan Consumer Sentiment Index dived 11 points in one month, which at first blush, gets your attention. But a little introspection is needed, as always. First, I would imagine most of this is driven by fears of a Covid resurgence thanks to the Delta variant. There's been some complaining about gasoline prices, but this is really overdone by the public and stoked by the media. Even a 25 cent a gallon hike in gas prices does not upset the average consumer's budget. But there's another reason to discount the data: Political sentiment.

It seems the more unhappy you are with the election results, the more sour you are on the economy. This isn't new. I regret not saving it, but there was a screenshot someone had made of a John Maynard Keynes quote in which he observed that people were always under the impression that the economy would suffer under a Labor government and do better under a Tory one. History doesn't bear this out on either side of the Atlantic, but political prejudices count for a lot when it comes to perceptions and perhaps there has been no other time in history when this is more true than now.


Speaking for myself, out of all the charts and data that gets thrown at me, I have never given this one much credence as an economic indicator. It acts like a mood ring, and apparently, short term pops and drops in the index haven't meant a thing for the economy since its inception.



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Donald R. Davret, Investment Advisor Representative

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