Explaining Consumer Confidence
Stories about consumer confidence being at its lowest level in 10 months are being published in business papers and websites this morning. We all know what that means, but do any of us really know how “they” decide how “we” are feeling about things?
Similar to the Nielsen ratings, which track a minute percentage of the population’s viewing habits and translate that into guessing/estimating who is watching what, the same holds true with consumer confidence levels.
A non-profit group called The Conference Board surveys 5,000 households every month, asking them 5 questions about current and future business and employment conditions, as well as future family income. Receiving answers of “positive,” “neutral,” or “negative,” the Board collects the data and compares it to the previous month’s answers to produce a relative value known as the Consumer Confidence Index (CCI). The CCI is “defined as the degree of optimism on the state of the economy that consumers (like you and me) are expressing through their activities of savings and spending.” 1
The result is a number, which only means something if you know the relative value. This month, the CCI was at 46, a low number when you consider that the number was 56.5 last month.
Read on:
Bloomberg.com – U.S. Economy: Consumer Confidence Falls to Lowest Since April
Investopedia.com – The Conference Board
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