Recent CNN.com headline: Dow tumbles 800 points amid new warning of recession
Recent CNN.com headline: How 1%ers are preparing for apocalypse
Recent FoxNews.com headline: Trump-haters hype up a recession while the real economy is booming
Recent FoxNews.com headline: Trump in big trouble for 2020. Political and economic warning signs there for all to see
If you’re an avid headline consumer, you wouldn’t be blamed for pulling your bucks out of the bank and curling up in a ball in your basement. But if you’re just a good old-fashioned American consumer, relax. The ball, in fact, is in your court.
Our nation is continuing its longest economic expansion in history. Credit Trump or blame him, the fact is, the good times started rolling more than 10 years ago. This summer, the economy cracked its longest-ever expansion of 120 consecutive months, a mark established back in the ’90s.
So with 100 percent certainty, we know the good times can’t last forever. But what about the apocalypse? About a recession? More to the point, what about our jobs? What about our precious 401(k)s? And what was that we said about the ball being in our court?
Oh yes; consumer confidence.
It’s key, you know.
Consumer consumption accounts for roughly two-thirds of a country’s economic activity. According to Britannica.com, it’s “an economic indicator that measures the degree of optimism that consumers have regarding the overall state of a country’s economy and their own financial situations.”
A strong economy spurs consumer confidence, which in turn leads to more spending — particularly on big-ticket items like new cars and appliances — which makes the economy stronger. And so the happy cycle goes — until it doesn’t anymore.
According to Britannica.com, when “consumer confidence declines, consumers become less certain about their financial prospects, and they begin to spend less money; this in turn affects businesses as they begin to experience a decrease in sales. If consumer spending continues to decline and businesses begin to cut back on production, the economy experiences a slowdown and may eventually enter a recession.”
While there’s plenty of stuff in the universe that could go wrong, “black swan events” as economist John Mitchell reminds us, the average citizen is not powerless in preventing slowdowns and recessions.
Don’t go out and spend recklessly.
Do remember that spending powers the economy, and shrug off the headline alarmists.