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Consumer Confidence: Which Way Is It Headed?

There is no doubt that the housing market and the economy are intertwined. The economy will get better as housing improves. Housing will regain strength as the economy improves. How is the economy actually doing? One measure is the Misery Index which combines the inflation and unemployment numbers.  According to their site:

The misery index was initiated by economist Arthur Okun, an adviser to President Lyndon Johnson in the 1960’s. It is simply the unemployment rate added to the inflation rate. It is assumed that both a higher rate of unemployment and a worsening of inflation both create economic and social costs for a country. A combination of rising inflation and more people out of work implies a deterioration in economic performance and a rise in the misery index.

The higher the index, the weaker the economy. Here is a graph of the index over the last 18 months.

 

How does information like this impact Consumer Confidence?

Obviously, this index reflects on the factors that eat at consumer confidence. Bloomberg News reported on this saying:

Confidence among U.S. consumers dropped more than forecast in June as households contended with higher prices that are eating into incomes amid slowing job growth.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 71.8 from 74.3 in May.

Bottom Line

It will be difficult for housing to rebound while consumers are concerned about their financial futures.


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2 replies
  1. Mark Brian
    Mark Brian says:

    I have to agree that it is going to be difficult for housing to recover without real improvement in the economy and the unemployment numbers.

    I hope everyone will watch what their elected officials are doing to help the economy, improve the unemployment numbers and also help the real estate market. When the next election rolls around, remember what they did to help America…….

    Reply

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