The Indicator from Planet Money - Why Consumer Confidence Is So High

The nation is reeling from the effects of the coronavirus pandemic. Lockdowns and layoffs have devastated the economy. But consumer confidence is higher than expected.

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what are the things that always surprises me about economics and about the economy is the role of emotions a feelings. I mean, I feel like business reporters an economist always throwing these numbers in these Sigma Chi No, like trying to steal official in Maffei put the hens you don't card. If you can't hide it a lot of what moves the market is just like the feels feels you no feelings are powerful economic forces. They can determine if businesses hire more workers or lay people off or if they end up investing in new equipment. They also can determine if an individual will splurge on a new car or a streaming subscription or if they'll squirrel away their money in savings feelings are such a powerful force that developed all these ways to try to measure them like the consumer confidence index which came out this week and it was up people are

More confidence and that means well actually was not sure what that meant or why was happening. So I called if someone who did not mean to be clear. I did not call. This is the indicator from Planet Money. I'm Stacey Vanek Smith on the show feelings. Why do we try to measure them? Why are they up right now? I mean in my case, it's cuz I'm hanging with my homie Stacey Vanek Smith. What does it mean for the economy when those feelings are up or down?

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Sucharita kodali is a retail Analyst at Forrester sucharita. I am so glad that you're with us and I wanted to ask you about feelings and the economy specifically the consumer confidence index was up this week. And what does that help predict? Like what do we expect to see happen when consumer confidence goes up or down when people are confident they tend to spend more and that tends to Ted 2 generally fuel the economy. If you are less confident that could mean things like cutting back on what you're spending on or I do not buying anything discretionary or buying cheaper versions of what's discretionary and you know, it's funny because your confidence right now is not that terrible but it's nowhere near as bad as it was like an 2008/2009 really so it's it's relatively good for where we are relatively strong and they're certainly

Sector of the economy who have fallen on Hard Times of which there are millions and I think those are consumers that that are weighing down that confidence number but a significant portion of consumers especially affluent consumers have actually done very well through the pandemic for the most part. They have remained employed at their their pretend Amex dollar he's and they don't have as many places to spend their money because they don't have the restaurants to eat out at that Leisure Travel that they would have done normally and on top of that many of them have their wealth tied up in stock portfolios and the stock market has been on fire. You just look weird time is it dark on me is almost split into maybe even more so than was already happening and there are some people who are just in a desperate situation and then some people who are doing

May be relatively better than they were a year ago because like you said they're running the same salary and expenses of God down. There is definitely bifurcation. It was the case even before the pandemic but I think it's been even more pronounced now so consumer confidence is a lot lower than it was this time last year, but it sounds like you are surprised that it's not maybe like lower than it is right now. Oh, yeah, when we were going into the pandemics, we live the sinking the general consensus I have in March was that this is going to probably be as bad as the Great Depression. If not worse than the Great Depression. That was the prevailing wisdom before because we were shutting down the entire economy and thinking was everything is going to Halt but that actually didn't turn out to be the case and how is that translating in retail?

People buying a lot of stuff right now or some stuff for a fascinating fascinating question. And in all of the things that we have been looking at this the most interesting part is hat retail spending and aggregate which very few people realize is that record high levels. If you look at the whole us were buying more than we were like we're buying more than I think in the last 20 years, you know in the last month the enough and no I didn't. Wow, you don't think of that right? There are some sectors that I've been suffering from endlessly and it's two sectors that have been suffering the most are the apparel sector which is heavily tied some malls and that's why you hear a lot about the mall suffering and the other is the restaurant sector but on the other hand we are seeing record high levels of spend with mass Merchants. We are at Target and stuff Target and Walmart nursing record high levels of

And with a grocery stores and you're actually seeing growth in some companies like Barnes & Noble kind of come back from being on life support people just need more things to do at home or ways to entertain their kids so correct me if I'm wrong, but it even taking into account restaurants what you've just been like totally decimated in and places that kind of foot traffic in all of that on the whole. We're buying more just been like a net gain even with that big drag coming from the amazing to me. I mean that's almost unbelievable to me because yeah, you know what I walk around New York City and it's like a ghost town for like 4 leaf signs everywhere. It's shocking and my numbers are coming from the Census every month. They release Jada around how much people have spent and we saw that declined that precipitous decline in the months of

April but those that was the worst of it, you know, you saw the economy starting to get to reopen and some of the spend rebounding or in some of the spend just being replaced. So, you know instead of people going to the malls they would spend money at Target and Walmart, or are you spending money at restaurants? They were you know buying food for for cooking at home. They were buying products online on Amazon red lick Furniture cookware exactly. What indicators are you watching going forward to get a sense of the economy right now? Is there something that you're keeping your eyes for me? It is the number of retail bankruptcies because we did have a record number of retail bankruptcies in 2020. But the fact that that number wasn't fire was I think due to the fact that there were a lot of rent abatement and a lot of landlords were just letting people not pay their rent, but I think a lot

. Is now coming due and now is is the time this quarter next quarter if we start to see more retailers declaring bankruptcy that's going to be the sign for me as a pretty drastic shake-up.

Sucharita, thank you so much for talking with us. Oh, thank you. Stacy. Sucharita. Kodali is a retail Analyst at Forrester. This episode of the indicator was produced by Dave Blanchard and fact-checked by Sam by the indicator is edited by Patty Hirsch and is a production of NPR.
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