Why Consumers Are Underconfident

Why Consumers are Underconfident

As your average consumer, here is a micro perspective.

My local grocery, walking distance closed, now I have to drive.

The gas in my area went up to $4.15/ gallon.

Last time I paid $2.87 for two onions at another store.

My local restaurant closed down.

The dollar is weak, airplane tickets are sky-high, so I can't visit my father in Europe.

His retirement is paid in cheap dollars.

The productivity at work went up, longer hours and more stress, while raises went down hill.

Thanks to H1B visas and globalization it's harder for even educated American workers do find or switch jobs.

Due to the housing crisis, rents for my apartment have shot up .

However, I noticed that welfare recipients still get free Section 8 housing thanks to the overtaxed middle class.

My bank now charges service fees, it used to be free.

The local parks now charge entrance fees, it used to be free.

I see underbudgeted police departments going out and ticketing drivers almost every day.

etc.

I don't need to mention the cost of healthcare and education.

In any case, the american middle class has been squeezed long enough and there is no relief in sight.

Yes, the economy is in great shape to head-in-the -clouds economists if you look at company profits, but it surely was not the american middle class who reaped the benefits. When consumers start cutting back on spending, it will yet backfire.

Thomas Cromwell of CA @ May 27, 2008 18:02:47 PM

Middle Class is suffering on many fronts

Middle class working families are suffering under the onslaught of rising costs in several key budget areas. Health care expenses have been rising year after year, employers are cost shifting to employees and insurance companies deny claims. Energy - just look at the gas pump prices! College tuition is another area of hyper inflation with families and their kids going into debt to get an education and a living wage job. And now we have the subprime meltdown and home values dropping.

Stagnant wages for the last decade have made it harder and harder to pay increased health care, energy and education costs for middle class families.

Meanwhile we can read about record profits for energy, insurance and drug companies.

Consumers in the top rich neighborhoods and the CEO's may look at 5% unemployment and wonder what the consumer confidence problem is........but not middle America.

Terry Gardiner of WA @ May 27, 2008 17:06:15 PM

Yes, sure! You just forgot to mention, that US consumer was burning money he did not earn for many years. That Enron and followers burn retirement plans. That Dot-com evaporated another huge chunk of savings. That auto industry buys retirement plans from employees, but the amount it pays is equal to only half of estimated medical expenses. That many consumers jumped in “American Dream”, then squeezed to the bones, and never the less walked away with empty everything. Yes, prices for secondary crap don’t go up because primary staff does not leave anything in the packet, and there is no way to borrow more, even the existing debt is not supported by property due to the home equity were not put in homes, but in crap. Wait, let see how the consumer will be happy after cooling and heating bills are arrived. Consumer doesn’t need to care about inflation if he doesn’t have half million investment package, but he does, when salary doesn’t grow to cover primary needs.

Timer of NH @ May 27, 2008 16:53:03 PM

Why Consumers are Underconfident

Wow, inflation is only 4%? Basic needs certainly seem to be going up at a faster rate, and I have to agree with Micah that not everything is included in the calculation used to get to that 4% number.

I believe that the average wage decreased by about $1000 between 2000 and 2006. Don't know what it is in 2007 or 08, but would be interesting to see those figures.

And was it March when the government printed an additional $800,000,000,000 (800 billion dollars)? How does that affect inflation?

And, M3 stopped being reported a few years ago, so we don't know how much credit is really out there, or the effect on the value of the dollar.

And how far has the dollar dropped in the last couple years?

There are a lot of factors going into the consumer confidence number. Only time will tell what the full effects are.

Sturdy of CA @ May 27, 2008 16:31:39 PM

Why Consumers are Underconfident

This is why I am underconfident,

Salary increase in last 5 years 2 % total

Staples to survive, food +12%, Gas +100%, utilities +14%, homeowners insurance +6%.

You talk in abstracts the average consumer does not care about or deal with on a daily basis like the staples one needs to survive. Maslow’s theory of needs takes precedent over your abstract generalizations which is what we consumers deal with on a daily basis.

Walt Jackson

Walt Jackson of TX @ May 27, 2008 16:20:20 PM