Can Consumer Confidence Be Restored?

Consumer spending has seriously declined over the past couple of years. People have been slow to purchase large items such as homes and automobiles. The value of a dollar does not go as far as it use to. Consumer confidence is lower now than it has ever been.

Consumers have lost faith in the American economy. They are almost to the point of hopeless. High unemployment rates, the recession, and failures of both banks and thrifts; these are factors that have made people leery about spending. Consumers are going to be compelled to spend less and save more. They realize that you cannot just live for today but that those rainy days that they once worried about are now here. It is not that they do not have the money to spend but they are not comfortable doing so.

It does not take much to restore consumer confidence. The state of the economy has forced many people to become more frugal when it comes to spending their hard earned money. In order to restore consumer confidence there must be a consolidated effort with banks, business, mortgage lenders, and automobile manufacturers. Starting with banks, many of them will not even loan money to its on business and personal account holders. This surely has a negative effect on consumer confidence because. Many of them use money from loans to finance homes and cars. Mortgage lenders should try to continue first time homebuyer's and others who may be upgrading from starter homes. This will make consumers eager to purchase homes. At least a one percent reduction in interest rates would also contribute to restoring consumer confidence. Automobile manufacturers should stop waiting to the end of the year to reduce prices just for the sake of eliminating surplus inventory. This should be done throughout the year. Consumers will surely purchase more vehicles especially if the prices are affordable. Businesses should focus more on having general sales on merchandise rather than just having the traditional holiday sales. There has to be some type of motivation for consumers to spend money. According to Neil Dutta from Bank of America, consumer confidence won't return until the labor market turns around.

In order for consumers confidence to be restored they must be motivated to spend. It does not take much to make people feel comfortable about spending money. This will only be possible if businesses make extra efforts to offer incentives and reduce prices of both goods and services.