Tuesday, January 25, 2005


Psychology Trumps Economics

Why wasn't this expected?

U.S. January Consumer Confidence Index Rises to 103.4

Jan. 25 (Bloomberg) -- U.S. consumer confidence unexpectedly rose in January to a six-month high after the economy added more jobs and incomes grew, raising the odds that spending will spur the economy.

The Conference Board's index increased to 103.4 from a revised 102.7 in December that was higher than first reported, the New York-based research group said today. Optimism about the current economic situation rose to the highest since May 2002, helping fuel gains in stock prices and the dollar.


Economists forecast the confidence index would fall to 101 this month, based on the median of 65 forecasts in a Bloomberg News survey, from December's previously reported reading of 102.3. Estimates ranged from 98 to 107.5, and just nine of the economists surveyed forecast an increase.
The article doesn't say what sorts of techniques were employed by the economists in making their forecasts. Any? Or were they just guessing offering a considered opinion, the same as anyone else?