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Trading on consumer confidence

Shoppers brows at the opening day of “Story” at Macy's in New York. The Conference Board’s monthly Consumer Confidence survey will be released Tuesday.
Shoppers brows at the opening day of “Story” at Macy's in New York. The Conference Board’s monthly Consumer Confidence survey will be released Tuesday. AP file | April 10

Americans are an optimistic bunch by nature. Being a long-term investor demands a positive attitude. Two snapshots of just how much the trade war between the U.S. and China is testing that cheerfulness will be released in the week ahead.

The Conference Board’s monthly Consumer Confidence survey will be released Tuesday. The University of Michigan’s final Consumer Sentiment Index for May is out on Friday. Both have been riding high.

And why shouldn’t U.S. consumers be upbeat? The official jobless rate is tiny, work is plentiful, wages are increasing, inflation is barely there, interest rates are low, and the stock market has been strong.

As any retailer can tell you, though, American consumers can be finicky. Sure the conventional economic statistics are positive, but the tough trade talk between the U.S. and China is likely to chip away at economic enthusiasm. Even if the American tariffs on Chinese goods haven’t found their way to store shelves or online check out bins, they’re bound to given the current state of trade negotiations. And talk of higher prices in the future can dampen actions now.

When the University of Michigan conducted its preliminary sentiment survey in early May, the entire jump in confidence from April came from consumer expectations, not their current situations. Shoppers were sanguine about what lies ahead.

This was before the latest collapse of trade talks between the U.S. and China. As the survey’s Chief Economist Richard Curtain warned then, “Rising tariffs could cause a more general loss of confidence which could further diminish the pace of consumer spending.”

Measuring the impact of the tariffs doesn’t just include the financial cost. Consumer confidence may be more precious and important for prosperity and long-term investors.

Tom Hudson hosts “The Sunshine Economy” on WLRN-FM, where he is the vice president of news. Twitter: @HudsonsView

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