Rising consumer confidence trumps falling Dow

The Dow has lost more than 1,300 points in the last few weeks, plunging below 10,000 today as investors respond to Europe’s continuing economic troubles and other global headlines.

And, yet, U.S. consumers are blissfully happy.

The Conference Board said on Tuesday the Consumer Confidence Index rose to 63.3 from a revised 57.7 in April. The index measure how consumers feel about current economic conditions and how they view the next six months.

There seems to be a disconnect here. Why, I wondered, are consumers so happy while investors are running in fear? I called University of Tennessee economist Bill Fox for an explanation.

Fox said …

 … consumers may be paying more attention to falling gasoline prices and an improving jobs picture than they are the stock market.

In fact, retail prices in general are down, which makes consumers happy, said Fox, director of the UT Center for Business and Economic Research

Wild swings in the stock market make big headlines, but consumers are more influenced by every day life, he said.

Stuff like having a job and putting gas in the car. Imagine that.

But consumers are fickle, Fox warned. A rising Consumer Confidence Index is a good thing, but it’s no guarantee consumers will keep spending, he said.

Maybe not, but for now, conumsers are spending. And that’s good for the economy.