The Consumer Sentiment Index measures consumer confidence in a country’s economy through various means of research, with the oldest index in the US. The index is used by the government, businesses, and investors to understand consumer sentiment and anticipate economic trends.
The Consumer Sentiments Index is a tool used to determine general sentiments towards the economy of a specified country. This ongoing measure of consumer confidence is based on the use of various means of research to reveal sentiments about the economy among the population, such as the use of telephone interviews, direct mail campaigns and the most recent Internet surveys. Several countries host official and unofficial indexes of this type, with the oldest Consumer Sentiment Index operating in the United States of America.
Housed at the University of Michigan, the basic methods employed by the Consumer Sentiment Index were developed and first implemented in the late 1940s. Under the direction of George Katona, specific criteria were formulated to collect, qualify, and measure consumer confidence. This work led to the creation of the Consumer Sentiment Index (ICS) as a vehicle for eliciting opinions from a population of the population regarding the current economy and their views on stability or lack thereof.
During the early 1960s, the Consumer Opinion Index was improved to function using a scale with a value of 100 as the measurement point. Since then, researchers compiling the data that result in the index have made extensive use of telephone interviews with households across the country. Other methods such as mass mailing and Internet-based applications have also been tried, but telephone interviews remain the most efficient source of qualified data.
The overall thrust of the Consumer Opinion Index focuses on what consumers think about their own current financial situation and how their circumstances compare to the overall picture of the economy. Often, the data collected also includes opinions about what consumers anticipate will happen to the economy in the long and short term. By conducting interviews with people in a wide variety of locations and economic situations, the index serves as a reliable tool for measuring overall consumer sentiment.
There are several frequently cited applications for the data contained in the Consumer Opinion Index. In general, the Index is considered a useful tool for government, companies and investors. The government can use the published monthly Index results to understand what people are thinking about the overall economic climate and whether they expect things to get better, worse, or stay the same. Businesses can use the data to identify consumer needs and move forward to meet them. Investors can use the data to identify consumer trends that could impact the value of various securities and buy and sell stocks accordingly.
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