Consumer Sentiment Vs. Government Policy

By Walter Kurtz Jul 13, 2012 11:20 am

If Deutsche Bank's theory is right, an improvement in government policy (at least as perceived by the consumer) should quickly translate into stronger economic conditions via this relationship.

The golden rule of statistics application is: "Correlation does not necessarily imply causality." But Deutsche Bank (DB) is making that claim nevertheless -- at least in part. The claim is that poor opinion on government economic policy in the US is resulting in low consumer sentiment (0.79 correlation), and therefore low consumer spending and stagnant economic growth. But can this be proven? Or is there another factor that's having a similar impact on both indicators?

The fact remains, however, that both are depressed relative to history. And if Deutsche Bank's theory is right, an improvement in government policy (at least as perceived by the consumer) should quickly translate into stronger economic conditions via this relationship.

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