But as headlines warn of a possible recession and uncertain times ahead, its only natural to feel frustrated.
What does it all mean?
Andwhat can we do to prepare?
What Is Consumer Confidence?
When the stock market tumbles and unemployment rises, consumers worry.
Consumer Perception vs.
Reality
Feelings arent facts.
Consumer confidence surveys reflect public mood, but they cant predict the future.
Still, they often align with key economic indicators like:
Headlines can also drive consumer behaviors.
This can be a self-fulfilling prophecy.
That is, consumers can dial back spending so much that they can cause a recession.
Are you struggling to cope with financial stress?
First, take a deep breath.
Then, take a look at our roundup ofresources to help you manage your stress and your money.
What Happens When Confidence Falls?
As past consumer confidence dips have shown, they can directly impact the economy.
Here are a few ways.
This can especially apply to big-ticket purchases like vehicles, furniture or electronics.
They may also hold off on travel until the tough times are past.
One of the strongest factors in consumer spending is what economists term the wealth effect, Johnson said.
The wealth effect is the change in spending that accompanies a change in either real or perceived wealth.
That is, when consumers feel wealthier, they tend to spend more than when they feel less wealthy.
They might slow hiring and even reduce staffing.
Expansion plans could be put on hold, along with other budget cuts.
Overall, these cutbacks can impact the economy.
Market Volatility
The recent ups and downs of the stock market are nothing new.
Consumer confidence can impact investor activity.
Investors may quickly sell off certain stocks or pull back on investing altogether.
This can negatively impact the stock market.
Selling stocks of reliable companies and ETFs at their lows is a major mistake, Guberti adds.
We all navigated tariffs during Trumps first term, and the stock market performed poorly in 2018.
However, stocks rebounded sharply in 2019 and are well above their 2018 levels.
Is Your Paycheck Not Going As Far As It Used To?
We get it.Everythingis more expensive than it used to be, but your paycheck hasnt kept up.
When money is tight,these resourceswill help nearly everyone.
But this can be a great time to look at your finances.
Here are some steps to get you started.
If you make any financial move out of panic, its likely to be a bad one.
Set Permanent Habits
This can be a great time to examine your budget.
You should be doing these things regardless of whether consumer confidence is high or low.
But the truth is, national headlines may not reflect whats happening in your community.
Even if the local economy is struggling, you may be able to coast through the turbulence unharmed.
This is a time of great turmoil for some people, Johnson said.
For instance, many people working for the government have lost their jobs and their future is uncertain.
Consumer confidence for these people is, and should be, very low.
I dont want to minimize their sufferings.
However,it isnt the whole picture.
Although declining confidence can signal economic slowdowns, its no guarantee.
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Stephanie Faris is a professional finance writer with more than a decade of experience.
