Is the economy really doing poorly? Is it mostly gloom and doom, or should you be more optimistic?
Presidential race polls reflect a great concern about the economy and that about half of the country thinks the US is “losing ground” on economic issues.
However, in economic surveys and data collected that are not part of the political process, a much more positive attitude of the economy is shown. Why is there such a difference?
Let’s look at the real information, not just rhetoric.
While people express concern about the economy, actual car and truck sales reflect a different reality. Consumers and businesses buy cars and trucks when they feel confident and positive about the future. They don’t make major purchases when they are truly worried or concerned about losing their job in the near-term.
US vehicles sales for 2016 are expected to exceed 17 million cars and trucks. They may not reach 2015’s record 17.5 million units, but should reach 17.3 million vehicles, based on sales data through August. US vehicle sales were far below 17 million vehicles from 2007 – 2014.
For decades, non-politically related economic surveys have been published monthly, which reflect greater confidence and a brighter economic future than the political polls. These surveys ask many specific questions to people about their jobs, houses, financial expectations, as opposed to broad questions about the direction of the country, for example. When framed in this manner, people tend to be more positive.
The University of Michigan’s Surveys of Consumers has published an “Index of Consumer Sentiment” for 70 years. Michigan’s National survey data shows attitudes consistent with a solid economy. As the chart above reflects, the Index has been in the low 90s during 2015 and 2016, while it had been in the 60s and 70s from 2008-2013. Prior to 2015-16, the last time the Index of Consumer Sentiment had been in the 90s was in 2000.
The Conference Board, a global non-profit organization, publishes a monthly “Consumer Confidence Survey.” Their most recent report, published this week,showed consumer confidence at a 9 year high. They stated that “consumer confidence …is now at its highest level since the recession …consumers continue to rate current conditions favorably and foresee moderate economic expansion in the months ahead.” Business conditions were considered “bad” by only 16.2% of the respondents.
Political polls appear to be poor predictors of major economic variables, such as consumer spending or job growth. However, the two confidence surveys have been found to be increasingly accurate in their predictive ability. UM has done its survey for 70 years and has eliminated questions that were thought to have predictive power, but did not, making the survey more predictive.
Former Federal Reserve Chair Ben Bernanke wrote a blog post for the Brookings Institution with this conclusion earlier this year. He stated “when Americans are asked specifically about the economy, in an apolitical context, they are for the most part not nearly as pessimistic as the conventional wisdom would have it.” He feels most Americans are positive about their personal situation and future, as would be natural in this stage of a business cycle, but are more worried about the economy as a whole due to political polarization and other social factors.
The consumer confidence data is consistent with other measures that show the economy performing solidly, but not spectacularly. It appears that election-related surveys are skewed by political views and that non-political surveys are more accurate at representing Americans’ actual economic outlook.
We recommend that you focus on what you can control, rather than on what the media or politicians are saying. We are optimistic about the future, as are most Americans, when asked specific, non-politically related questions.
Note: Full sources are available upon request. Sources include The Conference Board’s Consumer Confidence Survey, University of Michigan’s Surveys of Consumers, fivethirtyeight.com article by Tim Mullaney on 9/28/16 and Brookings Institution blog post by Ben Bernanke, 6/30/2016.