Crisis Of Confidence Continued : Planet Money Consumer confidence is up, ever so slightly.
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Crisis Of Confidence Continued

The New York-based Conference Board reported consumer confidence rose slightly in March to 26, from its all-time low of 25.3 in March. A year ago, the index was near 70.

The consumer confidence index measures Americans' take on the current economic situation and their expectations for the future. Those expectations make up 60 percent of the total index, with current conditions accounting for the other 40 percent. The Conference Board surveys 5,000 households every month.

Economist Ian Shepherdson with High Frequency Economics attributes the overall bump to a rise in the the expectations index -- it's up by 1.6 points. That, he says, "has to be seen in the context of the disastrous 6.4-point drop in February."

Economists with the Federal Reserve Bank of New York have studied whether consumer sentiment can influence or predict the direction of our economy. The short answer: yes.

In the FRBNY Economic Policy Review, June 1998, Jason Bram and Sydney Ludvigson write:

"Our empirical analysis suggests that consumer sentiment can help predict future movements in consumer spending...Measures of consumer attitudes available from the Conference Board have both economically and statistically significant explanatory power for several spending categories-- including total personal consumption expenditures; motor vehicles; services; and durables, excluding motor vehicles--even when the information contained in other economic indicators such as income, interest rates, and stock prices is known."