ResearchBPEA | 1975 No. 2
Why was the Consumer Feeling so Sad?
1975, No. 2
THE INDEX of consumer sentiment, compiled quarterly by the University of Michigan’s Survey Research Center since 1953, dropped to an unprecedented low of 71.8 in the third quarter of 1973; by the beginning of 1975 it had slumped to 58. Why was the consumer feeling so sad? Certainly, there was no lack of provocation. Watergate, widespread unemployment, double- digit inflation, and the collapse of the stock market provided cause enough for consumer despondency. Investigations by Hymans and by Juster and Wachtel had suggested that inflation and fluctuations in real income are of prime importance in explaining consumer sentiment; but they did not include the unemployment rate in their regressions.