Consumer confidence, as measured by pollsters, is reasonably high right now. But it has fallen a lot this month. So, who cares? What difference does it make?
70% of all U.S. economic activity is consumer spending. So imagine a consumer, watching the news. What does he see? The Greek debt crisis. The China stock crash. The ups and downs on Wall Street. Plus the economic fear-mongering attending with political campaigns.
Some consumers - and even some business owners - may become stampeded into thinking, I'd better be careful. I'd better spend less in case things go south.
It happens to the extent that a lot of people spend less, or delay investments, it becomes a feedback loop. It's another example of a recurring theme of these reports - that one of the scariest things about becoming an adult is discovering how little finance has to do with arithmetic.
A lot of it is psychology.
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