How strong is consumer confidence now?
A gradual easing of inflation has helped increase public optimism about the economy, said one of President Joe Biden’s top supporters in the U.S. Senate.
“I think President Biden has an incredibly strong record to run on,” Sen. Chris Coons, D-Del., said July 30 on NBC’s “Meet the Press.”
Coons referred to official data that showed year-over-year inflation had dropped to about 3%, close to the Federal Reserve’s 2% target.
“Consumer confidence is the highest it’s been in years,” Coons said. “So, the ground is moving in his direction.”
As Republican presidential candidates hammer Biden on the economy, we wondered whether Coons is correct that “consumer confidence is the highest it’s been in years.”
There are two main consumer confidence surveys, and they differ significantly on how optimistic the public is about the economy today.
What the data show
Coons’ office pointed to results of the consumer confidence index produced monthly by the Conference Board, a business membership and research organization. The group’s most recent finding, released July 25, reported that consumer confidence – as measured by an online survey – reached a two-year high in July.
Two years does qualify as “years” – as Coons broadly phrased it – though barely.
However, a second consumer sentiment survey, run by the University of Michigan, has less rosy data.
Although the Michigan survey shows a general rise in confidence since its low in June 2022 – the month inflation peaked – the confidence levels in the survey remain lower than they were earlier in Biden’s term.
The current level of consumer sentiment in the Michigan survey is close to rock bottom.
Looking all the way back to 1978, today’s level is lower than it has been in 92% of months in the statistic’s history.
Although the economy is not officially in a recession, consumer confidence levels were lower than now only during the early 1980s recession, the Great Recession that began in 2008, and the brief coronavirus pandemic recession.
All told, the Conference Board measurement is higher today than it was from about 2007 to 2017. Yet Michigan’s measurement is lower today than it was from about 2009 to 2021.
So, why does consumer confidence under Biden look so different depending on the metric?
Comparing the two metrics
Both measures are considered credible, but even some veteran economists told PolitiFact they didn’t realize there were differences between them.
The surveys’ differences are highly relevant now. The biggest one relates to the questions asked of consumers.
Economists from the Michigan survey and the Conference Board agreed about the differences between the two surveys.
The University of Michigan survey “tends to be more sensitive to inflation than the Conference Board’s measure, which tends to be more sensitive to labor market conditions,” said Joanne W. Hsu, consumer surveys director at the University of Michigan.
Allen Li, an associate economist with the Conference Board, agreed with Hsu, saying the Michigan survey “uses different methodology and a different set of questions, which makes their index a little more sensitive to rising interest rates and elevated prices.”
With high inflation weighing heavily on the questions asked by the University of Michigan survey – and with continuing strong labor markets boosting the Conference Board survey – it’s easy to see why the two surveys diverged.
“It’s been rare for these two measures to diverge as much they have, for as long as they have,” said Douglas Holtz-Eakin, president of the American Action Forum, a center-right think tank.
Our ruling
Coons said, “Consumer confidence is the highest it’s been in years.”
There are two major consumer confidence surveys, and they use different methodologies. One of them – produced by the Conference Board – shows the highest confidence levels in just two years.
However, the other major survey – produced by the University of Michigan – shows confidence near historical lows, with 92% of months since January 1978 recording a higher confidence level than today. This survey’s questions are more sensitive to the impact of high inflation, which has been front of mind in recent months.
Although both of the key measures of consumer confidence have been rising for the past year, only one supports the notion of “years” – and it’s only two years. The other credible measure has consumer confidence close to historical lows.
The statement has an element of truth, but it ignores critical facts that would give a different impression, so we rate it Mostly False.