The Consumer Confidence Index measures people’s opinions about the economy in a given country. It is used by companies, lending institutions, and politicians to understand the public’s mood and make decisions accordingly. The US Consumer Confidence Index is prepared monthly by the Conference Board.
A Consumer Confidence Index, or CCI, is a measurement tool that deals with the current opinions of people within a given country. Essentially, the Consumer Confidence Index is a means of using a cross-sample of the population to understand the current general sentiment about the economy and what people believe will happen to the economy in the near term. In most cases, the Consumer Confidence Index will use questions that help capture participants’ understanding of general business conditions, the current state of the labor market, and the current relationship between income and end of month.
Along with national programs that compile a consumer confidence index, from time to time there are also attempts to prepare a global confidence index. However, many financial and political analysts tend to view the attempt to prepare any kind of global report of this nature as of limited value. In general, the more focused national indices are considered to provide data that is more useful to companies, market analysts, and lending institutions.
In the United States, the program to compile a consumer confidence index has been in place since 1985. Essentially, the structure of the program operates on a scale of points, with further accumulation of points indicating that consumers are generally happy with their current financial picture and confident in spending money rather than choosing to delay major purchases. Lower scores indicate pessimism about the current and future economic climate, and generally indicate that people are being more frugal with their resources in anticipation of difficult times to come.
The US Consumer Confidence Index is prepared monthly by the Conference Board, a research organization that is independent of any industry or government affiliation. Including 5,000 households across the country, the focus group for the study represents various aspects of the culture and economic range present in the country. Based on the structure of this index, any consecutive two-month period where the level falls below 100 indicates a strong feeling among citizens that a recession is on the way.
Many companies make use of the Consumer Confidence Index to structure their marketing and sales efforts based on current research results. Bankers and other lending institutions use consumer confidence reports of this nature to assess credit activity and the potential for increased loan defaults. Politicians tend to regard the Consumer Confidence Index as an important tool for understanding the general public’s current mood about the economy and how well the government is doing in managing the current economic climate.
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