Question

1. What do you believe are some factors that have decreased consumer confidence? Do you think this decrease is linked at all to the economy?

2. How can companies market themselves to improve consumer confidence and entice consumers to purchase more during this time?

3. Do you believe that consumer confidence could be inversely related to consumers' willingness to save? Meaning that if consumers are less willing to spend, they are more willing to save for retirement, payoff debt, etc.

Answer 1

Consumer confidence is the Outlook that the consumers have towards the economy and their own personal financial situation. This Outlook can be optimistic( high consumer confidence) and pessimistic( low consumer confidence)

Consumer confidence often mirrors the state of the economy. A fall in level of consumer confidence is often an indicator of economic downturn.

Factors affecting consumer confidence:

1) Inflation and real wages

High inflation in the economy reduces consumer confidence. Falling real wages will make earning people dull and sick.

2) Personal debt level:

Rising debt level accompanied with high rate of interest can negatively impact consumer confidence

3) Fear of unemployment:

Being unemployed in the future can really make people more concerned about their consumer pattern and can send wrong signals to the economy.

4) Uncertainty:

A major political/ economic change can lead to Uncertainty which reduces confidence.

For instance: Elections, Terrorist attacks etc

5) Economic growth:

A recession will invariably be associated with a fall in consumer confidence; positive economic growth tends to improve consumer confidence.

IMPORTANCE OF CONSUMER CONFIDENCE:

1) Major component of aggregate demand and economic growth

2) Good indicator of future economic downturns

3) It can influence the future economic policy

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