Consumer confidence, business confidence do a flip-flop


Which way goes the economy? With consumer confidence and business confidence trading places, it’s anybody’s guess as to what’s next.

For the last many years, consumers have been feeling lousy, not spending money, and generally feeling pessimistic about the future. Meanwhile, corporate America was seeing increases in sales, profits, and market share. They had a really great run.

Now, things have gone in reverse. What’s called the Consumer Sentiment Index is at the highest level of the last five years. It’s not at an all-time high, but certainly people are feeling better about their prospects moving forward.

In the midst of that, corporate America is now feeling down and out. Top line revenue growth is down and profits are shrinking. Corporate chieftains are down about things, particularly the fiscal cliff. Yet consumers are not worried about the fiscal cliff at all in general.

So people are opening their wallets more. We’ve seen it in car sales. As the chief U.S. economist for HSBC says, “Debt is less of a burden” for households. That’s because we’ve spent the last many years paying down debt at the same time that interest rates on that debt have moved down.

But where do we go from here? Beats me. Though I can tell you American consumer spending is a little more than two-thirds of our overall economic activity. So you’ll see some positive economic momentum in the short run in spite of the fact that corporate America is feeling down.

And that fiscal cliff that consumers aren’t paying attention to? That will have from minimal to serious effect; we’ll just have to see what those politicians are up to after the election to know which one.

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