Newspaper article THE JOURNAL RECORD

Will Consumer Confidence Eventually Fade?

Newspaper article THE JOURNAL RECORD

Will Consumer Confidence Eventually Fade?

Article excerpt

After a decade of unprecedented consumption in this country, a question arises: How much longer can it continue?

It used to be assumed that after three or four years of heavy buying, consumers would have their fill. This was a law of nature, or so some believed. Appetites weren't insatiable.

Not everyone believed that to be so, and now they're seeing their views vindicated in this, a hyped-up that's a decade old and acting like a youngster.

Credit consumer confidence.

Month after month, the University of Michigan Survey Center and The Conference Board report that consumer confidence remains near record highs. Simultaneously, the economy keeps expanding.

Even Alan Greenspan, Federal Reserve chairman and chief inflation worrier, has found it hard to understand. Economists too, more of whom are now seeking the explanation in consumer psychology.

Professor George Katona, a pioneer in psychological economics, sought the answers many years ago, having concluded "prosperity cannot be sustained over long periods unless confidence and optimism prevail."

Yes, but how do you maintain it? Having discovered, perhaps by accident, that it can be maintained, economists are now studying how it all happened, the goal being to keep it going.

Finding the answer involves examining what appears to be a perpetual motion machine: Confident consumers spread confidence by spending; this promotes hiring and profits, which spread confidence more widely; more people spend; prosperity reigns.

Such a circle of confidence would seem to require natural resources, innovation, good economic policies, a growing work force and an absence of inflation, since inflation destroys the circle.

But more elements have now been added.

Intense marketing, for one; how else do you sell 17 million cars in a year to 105 million or 110 million households?

Inventiveness, for another. …

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