What Is the Consumer Confidence Index (CCI)?
The Consumer Confidence Index (CCI) is a survey administered by the Conference Board. The CCI measures what consumers are feeling about their expected financial situation, whether that's optimistic or pessimistic. The survey is based on the premise that if consumers are optimistic, they will spend more and stimulate the economy, but if they are pessimistic then their spending patterns could lead to an economic slowdown or recession.
Key Takeaways
- The Consumer Confidence Index survey measures consumer attitudes and confidence regarding their financial prospects.
- The index is issued by the Conference Board and is based on the Consumer Confidence Survey.
- The CCI provides insight into U.S. economic conditions, including whether consumers might make major purchases, such as homes and automobiles.
- It measures and compares how consumers view the overall economy, business conditions, and labor market presently and over the next six months.
- The CCI infers that when consumers are optimistic, they spend more, stimulating the economy, but when pessimistic, spending declines.
Understanding the Consumer Confidence Index (CCI)
The CCI is released on the last Tuesday of every month and is widely regarded as the most credible gauge of U.S. consumer confidence. It is essentially a barometer of the health of the U.S. economy and is based on consumers' perceptions of current business and employment conditions and their expectations for the business, employment, and income for the next six months. The CCI is conducted by Nielsen, a global provider of information and analytics onconsumers' buying and watching habits.
The Consumer Confidence Index is based on the Consumer Confidence Survey, which has a responding sample size of 3,000 questionnaires. The survey was initially conductedevery two months starting in 1967 but changed to monthly tracking in 1977.
There are five questions asked in the survey. The first two relate to present economic conditions while the remaining three are related tofuture expectations.
| Consumer Confidence Index Survey Questions | |
|---|---|
| The Present Situation Index asks | 1. Respondents’ appraisal of current business conditions |
| 2. Respondents’ appraisal of current employment conditions | |
| The Expectations Index asks | 1. Respondents' expectations regarding business conditions six months hence |
| 2. Respondents' expectations regarding employment conditions six months hence | |
| 3. Respondents' expectations regarding their total family income six months hence | |
Each response can be answered with one of three responses: positive, negative, or neutral.
Once the data has been gathered, the relative value of each question is calculated, which is then compared against each relative value from 1985, which is set as a benchmark of 100. This comparison of the relative values results in an index value for each question.
Consumer confidence expands as economic conditions improve. Likewise, it falls as the economy worsens.
The Conference Board
The Conference Board is a global, independent business membership and research association. It was formed in 1916, and its mission is to provide the world’s leading organizations with the practical knowledge they need to improve their performance and better serve society.
The Boardisdesigned to help its members understand and navigatethe most critical issues of the present time. The Board alsoconducts research and forums where business leaders convene. These insights feed into its research and meeting agendas.
Consumer Confidence Index Survey
TheCCI stood at 103.3 in August 2024, which is an increase from the previous month's reading of 101.9. A current CCI above 100 means consumers are more optimistic than the benchmark CCI of 100 set in 1985. When the current CCI falls below 100, it means consumers are more pessimistic than in 1985.
The business and labor market, measured by the Present Situation Index, increased to134.4 in August 2024 from 133.1 in July 2024. The Expectations Index, which is based on short-term expectations of income, business, and labor, increased to 82.5 in August 2024 from 81.1 in July 2024. A reading below 80 often signals a forthcoming recession.
The survey showed that confidence increased in August but not enough from the narrow range of the past two years. Consumers were mixed about how they felt about the economy. Consumers feel positive about business conditions but are concerned about the labor market, most likely due to the recent increases in unemployment. There was also less positivity about future income.
Confidence declined for people younger than 35 but increased for those 35 and older. According to the Conference Board, confidence declined for those making less than $25,000 and was highest amongst those making over $100,000.
Lagging or Leading Indicator?
While some in the economic community see the CCI as a lagging indicator, the Organisation for Economic Co-operation and Development (OECD) considers consumer confidence a leading indicator, which would make the CCI a leading economic indicator for the U.S. economy. Leading indicators provide qualitative information used to monitor the current economic situation and are awarning of turning points in economic activity.
What Is Consumer Confidence?
Consumer confidence measures how consumers feel (optimistic or pessimistic) about the state of the economy. Put simply, consumer confidence gives economists a window into how people are feeling about the economy. This is generally expressed in how they save and how they spend their money. The more they spend, the more confident they are about the direction and state of the economy. If people save more, though, it generally means they aren't feeling as optimistic.
Is the Consumer Confidence Index a Lagging or Leading Economic Indicator?
It depends on who you ask. There are some economists and agencies that consider it a lagging indicator, or one that changes after another related economic variable changes. Other organizations, such as the OECD, consider it to be a leading indicator. This is an economic indicator that provides a forecast of the future of the economy.
Why Is the Consumer Confidence Index Important?
The Consumer Confidence Index reports how consumers feel about the current situation of the economy and about where they feel it is headed. Conducted by the Conference Board, the survey consists of five questions about the present situation and three questions about their expectations for the economy in the future. It provides insight into how they spend and save, which helps businesses and economic leaders track inflation and output.
The Bottom Line
The Consumer Confidence Index is a widely watched economic index. Reported at the end of every month, the survey measures consumer sentiment about the current conditions of the economy as well as how they feel about where it is headed. Conducted and reported by the Conference Board, the index is seen as both a leading and lagging economic indicator—depending on who you ask.
Article Sources
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The Conference Board. "U.S. Consumer Confidence."
The Conference Board. "Consumer Confidence Survey Technical Note – May 2021," Page 1.
The Conference Board. "Consumer Confidence Survey Technical Note – May 2021," Page 2.
The Conference Board. "Consumer Confidence Survey Technical Note – May 2021," Pages 2-3.
The Conference Board. "Timeline."
Organisation for Economic Co-Operation and Development. "Consumer Confidence Index (CCI)."
The Conference Board. "Consumer Confidence Survey Technical Note – May 2021," Pages 1-2.
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