My Drum piece today is on consumer confidence and whether or not it is as important as we suppose.
It is a damn hard thing to demonstrate correlation between it and economic growth, though I’m sure it can be done – with varying degrees of confidence and holding various assumptions.
I try to avoid too much regression analysis – though it certainly has its place, and just like looking at graphs and seeing what picture is told. Personally rather than look at “confidence” I’d rather more time is spent looking at a variety of measures (including non-economic) such as occurs with the OPEC Better Life Index. Also we can always have a look at the good old “Misery Index” which adds the unemployment rate and inflation rates together (a lower score means less ‘misery’):
Here, by comparison, is the Westpac Melbourne Institute Consumer Confidence Index over the same period:
Which perhaps suggests, we’re more confident about our misery now…
Anyhow here are the graphs:
Here’s a similar graph looking at a few more countries: