The Consumer Confidence
Survey measures the level of confidence individual households have in the
performance of the economy. Survey questionnaires are mailed to a nationwide representative sample
of 5,000 households, of which approximately 3,500 respond. Households are asked five questions that
include (1) a rating of business conditions in the household’s area, (2) a rating of business conditions in
six months, (3) job availability in the area, (4) job availability in six months, and (5) family income in six
months. The responses are seasonally adjusted. An index is constructed for each response and then a
composite index is fashioned based on the responses. Two other indexes, one for an assessment of the
present situation and one for expectations about the future, are also constructed. Expectations account
for 60% of the index, while the current situation is responsible for the remaining 40%. In addition,
indexes for the present and future economic situations are calculated for each of the nine Census
divisions. In the base year, 1985, the value of the index was 100.
The Conference Board
also tracks consumer buying plans for the next six months. Among the items
tracked are automobiles, homes, vacations, and major appliances. If the economy experiences a
long-term expansion, buying intentions may decline even while the jobless rate declines because of the
satisfaction of pent-up demand. Conversely, if inflation begins to accelerate, spending plans may
increase for the short-term as consumers buy now to avoid having to pay higher prices later.
correlates closely with joblessness, inflation, and real incomes. The growth
help wanted advertising as measured by the Conference Board has also been a strong contributor to
consumer confidence. Rising stock market prices can also boost consumer confidence.
Related Indicators: Consumer confidence is important because Consumption spending represents about 56% of the GDP and is divided into three categories: durable goods (items expected to last more than three years), nondurable goods (food and clothing), and services. Other related concepts are those of Personal Consumption Expenditures and Retail Sales that are published monthly rather than quarterly.
Source: The Conference Board
Frequency: Data is collected during the first eighteen days of the month for release on the last Tuesday of the month.
Availability: Each month’s data
is revised the following month based on a more complete survey response.
This is the only revision, although seasonal factors are updated periodically.
Timing: Leading indicator of the business cycle
Likely Impact on Financial Markets:
Low. Financial markets interpret rising consumer confidence as a precursor
higher consumer spending. Higher consumer spending could in turn is expected to spark accelerated inflation.
The Conference Board