The economy is a tricky thing. At a fundamental level, it depends on the production of tangible goods and the provision of services. But it also depends, to a certain extent, on the confidence of the participants in the economy that things are working properly.

If consumer confidence drops, people start to spend less in anticipation of hard times. This leads to cuts in production to match the new, lower, demand, which in turn leads to higher unemployment, lower confidence, and so on. If the economy is fundamentally sound, this probably won't go on forever, since demand drops will lead to lower prices and an increase in spending to take advantage of the relative bargains.

On the other hand, if consumer confidence increases, that can aid an upward cycle in the economy that is self-reinforcing, thus increasing confidence even more. This has some ceiling that occurs when production reaches capacity and prices start to increase faster than wages, thus capping the demand. Easy credit can keep the upward spiral going beyond reasonable limits, which is, I think, what got us into this mess, at least partially.

So, really, *if* consumer confidence is increasing, it doesn't necessarily matter whether it's for real or imaginary (or at least not so good) reasons. Within some limits, an increase in consumer confidence is a self-fulfilling prophecy of economic improvement.

I tend to think that folks are feeling like the worst may be over. There seem to be some fundamental issues remaining--like unemployment, consumer and public debt--which probably won't lead to a big boom anytime in the very near future. On the other hand, people who are very panicky can make things much worse, so any calming of the waters can have a salutary effect in making things better. For example, confident consumers may, besides spending money on stuff, invest in new businesses that have some real consequences for economic improvement.

definitly real, but more economic data will be coming this week so we will soon find out exactly how real it is.

Looks like we have hit the bottom. The market is going up slowly. The job claims are tapering off. Looks like unemployment is not going to rise much above 9 percent. Those people who still have a job are probably ok, and I suspect that a lot of people are counting on the job stimulus program. Not the autoworkers though.