Confidence in the economy, by both consumers and business, is a critical leading indicator of economic health. But reading confidence measures is not straightforward.
The human psyche responds in complex ways to uncertainties. Despite recent high uncertainty about economic policies, confidence has not suffered much so far. This may owe to a couple of constants: labor market health drives consumer confidence, while businesses typically gain confidence from their ability to invest and see profits.
At The Conference Board we run a large portfolio of economic indicators, many of which reflect confidence. We have published the Consumer Confidence Index® for the US since 1967 and The Conference Board Leading Economic Index® for the US, since the mid-1900s. In 2017 we added The Conference Board Leading Economic Index® for the global economy capturing about three quarters of world GDP. Finally, this year we have started publishing The Conference Board® Global Consumer Confidence Index in collaboration with Nielsen, covering 63 economies.
Collectively, our portfolio of confidence measures still points to limited risk of a turning point in the economy in the short-term. But the recent levelling off or, in some instances, even weakening of confidence, especially in Europe and several emerging markets, is a concern. We need to keep a careful watch on weakening confidence, which may eventually develop into real downturns. We should also remember that shocks such as a trade disruption can trigger a sudden reversal in confidence measures.