Consumer Confidence Goes Through the Spin Cycle

Consumer confidence has traditionally been one of the key measures of the health of the U.S. economy. But no longer. Consumer confidence is now a bogus statistic, suitable only for cherry picking a data point that sounds persuasive but really isn’t.

In the first post-election snapshot of consumer attitudes, the results unsurprisingly showed that those who identify with the “winning” side are now more optimistic about the economic future while those on the other side are less so. But this reversal of prospective fortune has less to do with any change in the state of the economy as much as it does with political identification.

Consumers who were more pessimistic about the economy in the months leading up to the election turned those financial frowns upside down. While some of that is explained by the prospect of tax cuts and looser regulatory oversight, much of it comes from political affiliation and the economic spin running across the ideological spectrum.

People spoon-fed a steady stream of doom-and-gloom about the economy that is primarily the result of the party in power have shifted their vibe to embrace the endless possibilities of a new regime. But even though their perception of the economy changed, the actual state of the economy is exactly the same as it was before the votes were counted.

Likewise, those consumers championing the Federal Reserve Board’s efforts to bring inflation down to the 2% benchmark while at the same time maintaining a healthy job market are now doomscrolling through social media to see the latest predictions of impending economic armageddon.

But they too are looking at the world through politically colored glasses. And that makes measures of consumer confidence less reliable as an indicator of the economic future. In a very real sense, the politicization of economic information has created a feedback loop where financial information is reported with a left- or right-leaning bias depending on the target audience, reaffirming the preconceived notions of consumers as they sit happily in their echo chambers.

To be sure, perception is reality when it comes to the economy, but when those perceptions are amplified by subjective coverage it is clear that many in the business press have joined the dark side and moved economic journalism to become the dismal art to economics’ dismal science.

Thus, the Age of Economic Spin.

Given the complexities of economics and the mind-numbing use of statistics, it’s not surprising business news – or at least the commentary on business news – has become less precise and more partisan. While the straightforward economic data is reported, the framing of the stories changes depending on the audience and platform. It is an example of the mass communication theory of agenda setting. The media does not tell people what to think directly, but what to think about. And when it comes to economic and business reporting, that “what to think about” is either sustainable growth or impending decline.

Needless to say, there will still be plenty of report on consumer sentiment purporting. The surveys offer a lot of short and simple information that can be packaged with graphics and sound bites to fill a 45-second slot or a 15-inch news hole. Enough to give consumers something to think about, but not enough to provide them with information they need to make decisions in their daily lives.