Every month the Conference Board has a survey conducted that asks 5,000 households how they feel about current and future conditions in the economy. The 5,000 households surveyed in July gave the economy an exhuberant 107.0 rating on the Board's Consumer Confidence Index. Pessimistic economists reasoned that folks just couldn't stay that happy for very long and predicted that the index would drop 2 points to 105.0 in August. Well, they were approximately correct about the magnitude of the change, but they were dead wrong on the direction. Today the Conference Board announced that its August survey revealed a reading of 109.4 for the Consumer Confidence Index.

From July to August, the index of consumer expectations about the future improved from 95.0 to 97.7, and the current conditions index rose from 125.0 to 126.9. In August the percentage of families that thought current business conditions were good increased, and the fraction of consumers who thought business conditions would deteriorate decreased. The percentage of families who expected an increase in income rose from 21 percent to 24 percent. But, 23 percent of the families still thought that jobs were hard to get.

If consumer confidence is a reliable predictor of future economic activity, then we should all be looking forward to happy times ahead. According to today's report, confidence levels about present and future economic conditions are higher now than they have been at any time since early 1990. But, If you've been paying attention to these daily articles for the past year, you will recall what happened in the second half of 1990 and the first quarter of 1991. That's right -- there was a recession. So, maybe we shouldn't put too much stock in the subjective opinions of a 5,000-family subset of the U. S. population. Maybe we should wait and see what the more-objective, more-comprehensive, data-based economic indicators tell us in the weeks and months to come.

Pat Lafferty (MF Merlin)

Transmitted: 8/27/96