Is the recent drop off in Consumer Confidence a product of reality or perception spun by doom and gloomers.  The answer....it’s all real baby.

The recent data series that depict a confidence, or shall we call it, a “feel good” level for the economy has simply plummeted over the past month or so to levels not seen in decades.  The dramatic drop has many analysts concerned as to the future prospects of consumption in light of this information.  Some explain the ultra pessimistic attitudes as a result of the negative messages pumped out by the media regarding the state of the housing market to political uncertainties.  But is the real driver behind the “feel bad” attitude expressed by consumers.  The answer is simply no.

The real driver lies more in the fall out from the bursting of the real estate bubble, the dramatic increase in inflation, the rising price of fuel and job insecurity.  As we all know, the value of most houses around the US has fallen significantly over the past year or so, which has dried up a major source of disposable income for consumers.  This along with significant increases in the price of goods and services throughout the economy has further dried up disposable income.  Some of the increase in prices has come from a falling US$ and hefty rise in the price of Crude Oil, the latter of which has directly put a pinch on disposable income again.  Finally, the US Equity markets are still in the red nearly 10% on the year and CD rates are yielding next to nothing.  Whoops, forgot one last factor.  Unemployment is on the rise.

Is the drop in Consumer Confidence a result of spin? Just look around you see where $20 bucks gets you these days.  Or better yet, in case you’re getting a tax rebate…see what kind of boost that will put in your consumption.