Almost everyone has heard of consumer confidence indexes. They move stock markets, influence corporate decisions and alter governments’ economic outlooks. There is only one small problem with them. According to a study on two closely watched studies, consumer confidence studies are basically worthless as a predictor of future spending patterns. When you think of it, this is quite some flaw. It turns out that consumer confidence just reflects the past and does not do a good job of looking forward–which is their purpose. Does this mean that you can ignore the news reports on the latest consumer confidence numbers since they don’t mean anything? Not yet, because as long as people either believe in them, or at least believe that others still believe in them, then they will continue to move stocks, influence corporate decisions and many other things that directly affect your life. Chalk up another win for bad science.

This entry was posted on Monday, March 14th, 2005 at 4:44 pm by Insider and is filed under Brilliant, but uncategorizable. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.