Why Consumer Confidence Is Key to Fighting Inflation | WSJ
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- čas přidán 26. 07. 2022
- Consumer confidence, sentiment, expectations… Whatever you call it, the measurement of how consumers are feeling about the economy is being closely watched by the Federal Reserve.
Why? Because consumer confidence can be a self-fulfilling prophecy: If enough people think inflation is going to get worse, it likely will get worse.
WSJ looks at how the two main measurements - the consumer-sentiment index and the consumer-confidence index - are calculated, and why Federal Reserve Chairman Jerome Powell has to not only bring down inflation, he has to make the public confident that he will.
Read more about why the Federal Reserve is trying to keep public confidence high on The Wall Street Journal: www.wsj.com/articles/why-cons...
Illustration: Adele Morgan
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Nicely explained.
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Thank you
One of the best videos I’ve seen
Prices are up, likely won't go back down so yeah. Not feeling too confident myself about the economy either.
Hey WSJ, do you have data about how many hours of pay of the average workweek goes to general expensese (like housing, food, gas etc.). 60 years ago, a 1 income (40 hours per week) could support a family with everything they needed. Since then the average hours worked per household has been increasing steadily, up to the point where both adults have to work 40 hours per week.
Is there something of a relationship between the price of necessary expenses (like I stated above) and the amount of hours worked per household? Perhaps a % of total income that remains steady or increases, meaning that it doesn't matter how many hours you work, extra time in your job will not result in extra luxuries.
Personally I believe there is many more luxuries that are affordable for a larger portion of the population than there was 60 years ago. Due to technology and increased productivity.
hey Joey, tell me how much stuff, we now consider a right or essential to life was necessary to life 40 years ago
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thanks for telling me
… economics has never been a hard science. It’s an emotions game, if no one thinks they can afford anything, then what good are any economic principles
It’s a social science. What good are all these models predicting human actions and incentives if you strip away the humanity?
It’s not “an emotions game” as you crudely put it. But people don’t pursue economic decisions they don’t know are there.
In the quantity theory of money, the monetary side of the equation is M*V, money supply times money velocity. Money velocity is how fast a dollar circulates through the economy, and that’s determined by people’s spending habits. If people think inflation will only get worse, then they but more now and lo and behold V is shooting up, making inflation worse.
Inflation cares about your feelings
If you think inflation is going to rise, you and everyone else buy more now, spurring faster circulation, letting companies know people will buy and higher prices, and now everything costs more. Yeah, inflation cares about your feelings. Because if enough people expect inflation, they will create inflation.
It went to an all time low in February. Why are we not hearing about consumer confidence at all in main stream news?? It’s all we heard about for years. Misinforming the people and it’s criminal.
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"...consumers, workers are the backbone of the economy."
So that's why we make sure the working class health care workers, teachers, trades and agriculture workers stay at the bottom rungs of society. I guess when the head gets inflated and heavy, the backbone bears the weight.
Equal protection of our own at-will employment laws for unemployment compensation can help with confidence issues.
Great story, thanks for sharing
They didn’t mention everyone’s 401k balances being down. That’s also part of the negativity.
Psychology and Economics two of my favorite fields to study! I'm studying business which has both...
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To me, this has always been obvious.
Happy people spend money, worried people don't.
When people spend money, the GDP goes up. When people don't spend money, the GDP goes down.
Here's the problem. People get too happy and spend a lot of money. Then the money runs out and they get worried.
Another angle on your type of story.
Happy people spend money, worried people don't.
When people are happy, demand goes up. When people are not, demand goes down..
Here's the problem. People get too happy and aggregate demand exceeds GDP. Then the supply runs out and prices go up.
You mean "consumers need to be confident getting more into debt"
Well, wouldn’t confidence in taking on debt in aggregate also imply confidence in ability to pay off debt?
we need to confidently sign up for capitol one
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Well explained video, good job WSJ.
Feelings and math have nothing to do with each other.
When gas goes from 45 cents/gal to over $5 a gallon in 50 years that makes me angry! The Federal Reserve is printing too much!!
Behind all these economic numbers are machines, robots, automation, energy - Advanced Manufacturing
I answered all survey questiond negatively in the vid...lol
Price gouging is not inflation.
The rich stay rich by spending like the poor and investing without stopping then the poor stay poor by spending like the rich yet not investing like the rich..
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Thank you for this. Will definitely reach out to her now. Thanks again
Thank you for explaining consumer confidence index, wasn't covered in macro econ class ahaha
How are we supposed to have confidence when our nation leaders are intent on tanking the economy?
good morning: all my love to George Katona!
I’m saving 65% of my pay, don’t trust none of them.
I love the Fed is playing mind games hoping consumers don't realize it, and in the meantime, WSJ is disclosing that the Fed is playing games and don't want you to buy more, etc. I wonder how it will work out and how consumer will behave after knowing that they are trying to control their behaviors.
I mean, it’s not a huge secret, and the Fed is backing up their statements with actions. They’re putting in their work with interest rate incentives, so it’s not simply “playing mind games”.
🇭🇺✊🏻
Spent a good 14 seconds trying to clean that speck in the lower left third off my screen.
I've lost confidence in the US dollar.
The rest of the world hasn’t clearly
lol, powell's best idea is fake it till you make it. I love it! We are all doomed.
Nah its just a band aid
Popopoo
Is a sentiment or confidence index about the government or society in general?
I'm calling BS on this. She says consumer confidence does a really good job at anticipating GDP. Looking at the graph, they are loosely correlated but the index does not lead GDP. As my econ professor once said "any discipline with the word 'science' in it, isn't".
You mean spend like there is no tomorrow so that the rich get continue to be rich.
Quick and Simple explanation on a topic I always wanted to know more about
For decades, the confidence in the US economy has been built on a false foundation of wealth and prosperity. Now, that foundation is developing very serious fractures as confidence is collapsing due to overspending and otherwise very poor financial management.
Excellent explanations! You made it clear the fate of consumer confidence lies on the shoulders of J. Powell's vibe. May he and all beings be at peace and at ease, knowing each new day is a chance to be a good person.
ask why not. what confidence will be there in consumers if you dictate what they must have after filling up market with infinite brands and products?
You already have it. I'm a claims adjuster and see it every day. This is not wizardry, it's common sense.
is confidence based on ignorance or knowledge? Or just spend no matter what is happening in the World?
what if all they asked were bragging????
TREAT every single day as if though we are in a very deep, very harsh recession like regardless!! Inflation is NOT transitory - rather, it is permanent for sure!! Some form of pessimism is good for us and is INDEED WISE like regardless!!!!
Consumer confidence when you are on a fixed income and inflation is high is low.
America just mad they are not getting free money this year 🤣😂
then there is your advanced technology and always demanding new new things
consumer sentiment is falling because of CPI, and who our current leadership is and how THEY're approaching it. Americans don't listen to Jpow. They're focused on our current president, and the lack of trust we have that he'll lead us out of this. His approval rating is a key indicator, and it's only fueling the fire with low consumer confidence.
If you vote for the libertarians, everyone will be confident that inflation will stop. A balanced budget, no more printing of money, and free banking are all things that will lower inflation.
The balanced budget thing, that’s not exactly an inflation fighting tool. And a small amount of inflation is necessary to spur economic activity and investment, hence the 2% target and why deflation is an “avoid at all costs” phenomenon.
As for free banking…🤣🤣 HAVE YOU SEEN THE SHITSHOW THE CRYTPO MARKET IS IN? If that’s not an exceptional model of free banking, I don’t know what is. I mean it’s just scam after scam after scam after scam. There’s a reason why we ditched free banking, and it’s got nothing to do with shadowy figures and backrooms. It. Didn’t. Work. A lot of average people were wiped out when scam banks or small banks went belly up with no insurance and no oversight. You’d have to be insane to think THAT, out of literally ANYTHING in the world would magically work now and “eliminate inflation”.
Free plastine
Buy AMC 🦍🦍🦍
Finally first one
If ya dont understand THEN what are ya doing now Soooo?
Pseudo-science.
We are already in a big crash, and inflation is a disaster. The CPI report is a colossal failure. To bring the housing market to a halt, the FED will have to pull out all the stops. The unfortunate reality is that other markets are being decimated. Diversification is essential if you want to stay green. Right now, crypto derivatives trades are the only thing in my portfolio that is performing well and making me money.
Bidenflation