Macroeconomics revision - measuring Consumer Confidence

For students preparing for macroeconomics exams, there is a useful analysis of consumer confidence on the BBC website this morning. Following the GDP figures released by the ONS last month, and the corresponding Nationwide Consumer Confidence figures for March, there is an assessment of the Nationwide index and the importance of expectations of employment and wages in the eyes of Robert Gardner, Nationwide’s Chief Economist.

This is contrasted with the view of Keynes who said that the influence of irrational spontaneous decisions is probably greater than the more considered decision-making of rational man: “Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits - a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.”

Dr Sue Eccles, a consumer behaviour expert at Bournemouth University, adds that social influences such as what is happening to the people closest to you also affect your outlook. She also believes that people are becoming naturally more sceptical, and less likely to be affected by the feel-good factor of events like the Royal Wedding or the Olympics, with a greater propensity to question the spending associated with them rather than be caught up in the optimism. Perhaps she wasn’t in a supermarket last Thursday – certainly all the supermarkets around me experienced a pre-Christmas spending spree on the eve of the Royal Wedding, with shelves being cleared out by desperate consumption – in spite of the fact that most of them would be open every day over the long weekend!