Debra Goldman’s Consumer Republic

Last week The Conference Board, as it does every month, unveiled its most recent Consumer Confidence Index numbers. And, as also happens every month, the media wasted no time in tweaking the public perception of the public perception. The wire-service headlines delivered the bad news: The index had slipped almost four points from its May level to 106.4. But the fine print offered a happy interpretation: 106.4 is a pretty high number, indicative of a relatively sanguine consumer.

Did I say sanguine? Slaphappy is more like it.

Surely consumers these days have every reason to be paralyzed with dread. Institutions and expectations that Americans hold dear are shrouded in uncertainty. Will Amer ica suffer another terrorist attack? Where and when will it occur? Do corporations’ financial statements bear any relationship to their actual financial condition? When will the stock market hit bottom? On all counts, it’s anyone’s guess.

Yet through collapsing sky scrapers and collapsing multi billion-dollar corporations, consumers have remained dogged frequenters of the malls. They’ve been buying cars, and they’ve been building and purchasing homes at historic rates. They appear to have breezed through the recession with their optimism intact.

True, consumers were badly shaken by the World Trade Center attack and the anthrax scare; last October and November the index fell to 85.5 and 82.2, respectively. But in the fourth quarter as a whole, consumer spending rose 6.1 percent over the same period the previous year. While business spending nose-dived and advertising went into a swoon, consumers kept putting their credit cards on the line to ensure that the recession would be a shallow one.

For all the hype, it is not clear that consumer confidence predicts anything about consumer behavior. Index bashing has become something of a sport among economists, who point out that low index numbers are often a better predictor of consumer-spending increases than rising ones.

Yet if the numbers provided by The Conference Board and the University of Michigan are not always that helpful to economists, they remain fascinating to those who live by the dictum that perception is reality. Why is it that millennial consumers have remained so upbeat in the face of so many anxiety-provoking developments? What happened to the irrational lows that are supposed to follow irrational highs?

Some economists point to the rising values of homes, which is providing the feeling of wealth that the stock market supplied not long ago. Others look to the irresistible lure of low interest rates. Maybe Americans, with their short attention spans, simply can’t remember what a prolonged period of economic doldrums, let alone pain, is like after living through a seemingly endless bull market.

The question remains: Is this what-me-worry optimism a form of idiocy, as our world-weary European friends like to believe, or is it part of the national genius? In the ’90s, when only suckers were pessimists, the answer was the latter. In the 21st century, it is less clear. Our economy may limp and stumble for months or years to come simply because consumers refuse to get depressed when conditions demand it and so prevent a sustainable recovery.

It stands to reason that sooner or later America’s mood will catch up to reality. Perhaps last week’s dispiriting news that WorldCom cooked its books to hide $3.8 billion in expenses over five quarters will be the disaster that finally wipes the grin off the American consumer’s face.

But don’t count on it. Early this spring, in the midst of 9/11 remembrances, falling stock-market averages and the worst of the Mideast violence, planners at Mullen Advertising conducted a number of mood-gauging focus groups. “Instead of fear, uncertainty and doubt,” reports Ted Nelson, director of brand planning at Mullen, “these respondents’ feelings centered on the opportunities and possibilities for personal and family self-improvement.” So determined were they to focus on the bright side, they even saw a silver lining in the stock-market meltdown that had destroyed their dreams of early retirement. Says Nelson, respondents “had been spending more time than they cared to admit worrying about how they were going to spend their retirement anyway.” Far from being a disaster, their shrinking 401(k)s were just one less thing to fret over.

By this logic, Americans will be thrilled by the alleged fraud at WorldCom. Thousands of employees and millions of investors have been screwed. But, hey, maybe it will cut down on some of those mealtime telemarketing calls. Life is beautiful.