Prompted by a plunge in the Consumer Confidence Index, which hit a near-five-year low in February, The New York Times dubbed confidence the "X factor that can save the day or push the economy over the brink into recession." Fed Chairman Alan Greenspan warned Congress that "changes in consumer confidence will require close scrutiny in the period ahead."
But in the age of the 24-hour news cycle, measures of confidence bring up a chicken-or-egg problem. Are consumers responding to their own lived experiences--say, a neighbor who lost a job, or a factory in town that shut down--or to the constant stream of hyped-up financial news on cable and the Internet?