Deconstructing consumer confidence

We have a market paradox on our hands. Consumer confidence is close to a 40-year low, suggesting that the economy is in worse shape now than in times that seemed far darker, such as the early 1980s, when both inflation and unemployment crept into double digits. Yet many of the current economic indicators, including inflation and unemployment, are rather positive -- or at least not as negative as consumer sentiment implies.

By Dan Ariely

August 25, 2008