Understanding the Consumer Confidence Index
The Consumer Confidence Index (CCI) is a survey conducted by the Conference Board that measures how optimistic or pessimistic consumers are regarding their expected financial situation. The CCI is based on the premise that if consumers are optimistic, they will spend more, thereby stimulating the economy; however, if they are pessimistic, their spending patterns may lead to economic slowdown or recession.
The Latest CCI
As of August 2023, the CCI stood at 106.1, down from 114 in July 2023. The current CCI, above 100, indicates that consumers are more optimistic than the baseline CCI of 100, which was set in 1985. Conversely, if the current CCI falls below 100, it would signify that consumers are more pessimistic than they were in 1985.
Is it a Lagging or Leading Indicator?
While some members of the economic community consider the CCI a lagging indicator, the Organisation for Economic Co-operation and Development (OECD) views consumer confidence as a leading indicator, making the CCI a leading economic indicator for the U.S. economy. Leading indicators provide qualitative information used to monitor current economic conditions and offer warnings of turning points in economic activity.
Why is the Consumer Confidence Index Important?
The Consumer Confidence Index reports on how consumers feel about the current state of the economy and what they expect for the future. The survey conducted by the Conference Board consists of five questions regarding the current situation and three questions about their economic expectations for the future. This survey provides insight into their spending and saving behaviors, helping businesses and economic leaders track inflation and production.
Conclusion
The Consumer Confidence Index is a widely monitored economic indicator. Reported at the end of each month, the survey measures consumer confidence regarding the current state of the economy and how they feel about the future. The survey is conducted and reported by the Conference Board, and it is regarded as both a leading and lagging economic indicator—depending on whom you ask.
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