That's important to governments, to investors, to us journalists. So we really would love to know how people are feeling. That's what we saw in the housing bubble, for example. So if people are feeling good that's generally good news for the economy, unless they're feeling too good, they're feeling irrationally exuberant. And if people are feeling generally good about the future, they're more likely to spend money, to start new companies companies are more likely to hire people, make investments. John Maynard Keynes called it animal spirit. I don't think we need a fancy index to tell us the American people are feeling worse than normal and not quite sure exactly how much worse than normal we should feel.ĬORNISH: So does it matter how confident we feel? I mean, who actually looks at this number?ĭAVIDSON: Well, the idea of confidence, of the emotions of the population, is an incredibly important one in economics.

It's been into the 70s and down below into the 50s over the last few months. I mean, it went up 10 points in February from the previous month. We're just about 70 now, which means we're, you know, well below how we felt in 1985 but we're way, way, way above where we were, say, in 2009 when we were down around 20. It's pretty good relative to recent history. It's pretty bad relative to all of history. If the index is below 100, as it is now, that means we're feeling worse than normal, worse than we did in 1985.ĬORNISH: So how bad is today's number? Or how good is it relative to where it's been recently?ĭAVIDSON: Well, that's the key point. So if the confidence index is above 100 that means we're feeling better than normal, or at least better than we did in 1985.

So they say, OK, 1985, that's normal, that's 100. The Conference Board chose that year 'cause it just happened to be a sort of normal year it wasn't particular great, it wasn't particularly awful. And in this case, the benchmark is the average amount of confidence Americans felt in the year 1985. We're going to put that question to Adam Davidson from our Planet Money team.Īnd, Adam, is it 69.6 percent? And if so, percent of what?ĪDAM DAVIDSON, BYLINE: Well, this is an index, meaning it's a number that tells you how you're doing compared to a benchmark. We hear this number and others like it reported all the time and that got us wondering: What does it mean to put a number to the concept of consumer confidence, a number like this month's, 69.6.

Earlier today, the Conference Board reported that consumer confidence spiked upwards this month. Despite warnings from Washington about looming budget cuts, Americans seem to be feeling better about the economy.

Flaws and all meaning