This morning the Consumer Confidence Index (CCI) for July dipped to 50.4 from 54.3 last month. While the slip is not as devastating as the previous month’s drop (which came after three months of increases), it leaves us with an index at its lowest point since February.
We’ve mentioned the CCI before. It measures how consumers feel about the stability of our current economy. Do we feel like we are able to spend our money, or not? Consumer spending makes up about 70% of our economic activity, which is why we rely on it heavily for recovery (and why economists closely watch the index). But the CCI is based on a survey of only 5,000 families in the U.S., so we have to take the results with a grain of salt.
Why the drop? It seems as though the gloomy job market leaves consumers with the urge to save, not spend, their dough. The lack of jobs seriously limits the economy’s ability to recover. Unemployment continues to hover near 10%, and the Federal Reserve predicts that this will take some time to get better.
The back-to-school season is upon us (better make the most of August), and isn’t looking too bright for retailers that rely on this shopping period. But for consumers, all we can say for sure is that this is certainly not a time to panic. The index is subjective because it is based on consumers’ feelings (and only .001% of the U.S. population’s feelings, at that).
LearnVest’s financial planner in residence, Lauren Lyons-Cole reminded us last month, “Money is an emotional thing.” We have to do our best not to give in to our natural tendency to let our emotions overrule our investment decisions. Stick with your investments and spending habits. This is not the time to sell your belongings and stock away the cash. Be smart about the situation. Giving in to panic will not whip your wallet into shape.