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FORTUNE.COM // NOVEMBER 2019
SOURCES: BEA; IMF; FEDERAL RESERVE; THE CONFERENCE BOARD
CHANGE IN CONSUMER AND CEO
CONFIDENCE SINCE START OF 2015
2015 2017 2019
CONSUMER
CONFIDENCE INDEX
–
–
–
–
0
10
20%
CEO CONFIDENCE INDEX
SEPT. 2019
+21%
Q3 2019
–40%
seeing prices of many
things rising—toys,
clothing, consumer
electronics.”
You can’t help won-
dering if consumers are
already starting to wa-
ver. Sales of recreation-
al vehicles are worth
watching because RVs
are expensive non-
necessities, an easy
purchase to postpone
if buyers are worried.
Sales fell slightly last
year and are down
sharply this year—their
first full-year decline
since 2007. Manhat-
tan apartment prices
offer a glimpse into the
minds of high-income
consumers, and those
prices are weakening,
the Douglas Elli-
man real estate firm
reports; in addition,
more buyers are using
mortgages. You might
think high-income
home buyers would be
the last people to pinch
pennies, but they could
also be among the first
if they have a clearer
view of economic
trends.
A group with an
even clearer view is
CEOs, and they’re al-
most despondent. The
Conference Board’s
CEO confidence index,
based on a September
poll, has plunged to
the lowest readingsince early 2009, in
the gloomiest days
of the last recession.
Only a year ago, the
CEOs mostly thought
economic conditions
were better than they
had been six months
earlier and would keep
getting better. Now
they mostly think con-
ditions are worse and
will get worse still.
As for ordinary
consumers—the mass
of buyers whose daily
decisions steer the
economy—their view
may be darkening at
this moment. The Con-
ference Board’s Sep-
tember reading shows
consumer confidence
at a still-extraordinarily
high level but down
sharply from August.
A Fortune survey of
more than 10,
households in Septem-
ber asked respondents
if they expected a
recession in the next
12 months. Two-thirds
said yes.
But consumer confi-
dence is an unreliable
predictor of recessions.
It always declines
before downturns—
that’s why it’s cru-
cially important—but
it sometimes drops just
as deeply in the midst
of booms, then bounces
back. All of which
suggests there must
be more going on in
consumers’ heads.
Nobel prize–
winning economist
Robert Shiller thinkshe has found the
missing factor. It’s the
power of story. “People
are motivated by nar-
ratives,” he says. “It’s
not distilled down just
to confidence.” In the
last boom, for exam-
ple, “everyone heard
concrete stories about
someone making
more money selling
their house than you
made working all last
year,” he notes. His
new book, Narrative
Economics, offers
many such examples
of stories going viral,
fueling booms and
busts through history.
“One narrative I’m
particularly concerned
about now is the A.I.
narrative—the idea
that technology will
take over almost all
jobs,” he says. That
narrative, if amplified
by social media and
combined with real
employment declines,
could tip the consum-
er mood from posi-
tive to pessimistic—
shutting down the
growth engine.
All recessions be-
come a self-reinforcing
downward spiral, but
the spiral can’t function
as long as consumers
stay hopeful. To sense
where we’re headed,
monitor the confidence
data and also listen
carefully to the tenor
of the stories you’re
hearing.
And for your own
good, spread sunshine.DESPITE RECORD LEVELS of consumer spending—accounting
for 85% of U.S. GDP growth in the past five years—American
consumers are far more responsible than they were
pre-recession. Their optimism could stave off a recession.