Comments on: Consumer Confidence Index points to end of recession !

By: Kiran

Kiran — Fri, 07 Aug 2009 14:44:07 +0000

I would say Capex is a leading indicator of ‘out-of-recession’ mentality. More often than not, companies (manufacturing, services or otherwise) generally have an idea of how the business is on-the-ground. If they start planning to allocate Capex (in terms of machines, lands, buildings), we might as well signal that as out-of-recession rather than just consumer confidence index as such. Job losses, no increments/bonuses will obviously lead to lesser expenditure (especially given our Indian mentality of saving) other than essential items.

Better business outlook -> More Capex -> No job loss/more increments -> increase in consumer expenditure -> increase in consumer confidence index.

That in my opinion is the chain. Let’s not get into the age old trap of confusing correlation with causation.

By: Arun Prabhudesai

Arun Prabhudesai — Fri, 07 Aug 2009 13:36:26 +0000

Sage, thanks for the comment.
off course, Recession is caused by the slowdown, however, it is exaggerated due to people perception and thinking.

For me, consumer outlook remains the most important yardstick of measuring which side the economy is generally heading..

By: Sage

Sage — Fri, 07 Aug 2009 11:12:10 +0000

Recession is caused by a slowdown in output. To say that it is all in the minds of people is way too simplistic.
Having said that, I’d agree that consumer spending forms about 70% of the GDP in the US and when that takes a hit, the output falls dramatically. and consumer spending is a function of consumer confidence which in turn is a function of how secure they feel about the future. And when jobs are being lost and incomes are falling, any consumer might not feel secure!