Several years ago, Newt Gingrich created a bit of controversy when he said in an interview that feelings are facts, and that the way people perceive an issue has just as much to say about it’s reality as any set of statistics that you could gather. Many people scoffed or reacted with outrage…but the truth is, he was kind of right: for instance, the way people feel about the economy has a strong influence on the objective reality of the economy as seen in the kinds of statistics that we can measure. In fact, economists generally accept the idea that people’s feelings and expectations about inflation — the number one public issue in the country right now — become self-fulfilling prophecies that manifest in actual inflation. That’s why if you listen closely to our nation’s economic leaders like Fed Chair Jerome Powell and Treasury Secretary Janet Yellen, you’ll hear them talk so much about consumer confidence.
The leading institution that measures people’s feelings about the economy in America is the University of Michigan Survey of Consumers. Their Consumer Sentiment Index is one of the most closely-watched metrics of what is happening, and will happen, with the economy. Their Director Dr. Joanne Hsu joins us to tell us what it means, why it’s important, and why we need to be paying extra close attention to it right now.
