A:

There isn't a difference between consumer confidence and consumer sentiment. Both terms are used to refer to the degree of confidence consumers feel about the overall economy and their personal financial state. Consumer confidence or sentiment dictates the level of spending that consumers will engage in. A high level of consumer confidence means that consumers, generally feel good about their financial condition, especially their ability to obtain and keep jobs. If consumer confidence is relatively high, then consumers are going to increase the amount of money that they spend. On the other hand, if consumer confidence is relatively low, then consumers are going to spend less.

Consumer confidence is measured by two indexes: the Consumer Confidence Index (CCI) and the Michigan Consumer Sentiment Index (MCSI). The CCI is a survey conducted by a not-for-profit research organization for businesses that distributes information about management and the marketplace. This organization is sometimes known as the Conference Board.The Conference Board usually surveys 5000 households from the country's nine census region. The survey usually covers five major sections:

  1. Current business conditions
  2. Business conditions for the next six months
  3. Current employment conditions
  4. Employment conditions for the next six months
  5. Total family income for the next six months.

The MCSI is a telephone survey conducted by the University of Michigan. The purpose of the survey is to collect information about consumer expectations regarding the overall economy. The MCSI also covers five sections:

  1. Personal financial situation now and a year ago
  2. Personal financial situation one year from now
  3. Overall financial condition of the business for the next twelve months
  4. Overall financial condition of the business for the next five years
  5. Current attitude toward buying major household items.

For more, read Consumer Confidence: A Killer Statistic.

This question was answered by Chizoba Morah.

RELATED FAQS
  1. Why should an investor in the retail sector consider the Consumer Confidence Index?

    Learn how the Consumer Confidence Index works and why it is such a valuable tool for retail investors to predict future consumer ... Read Answer >>
  2. Which economic factors most affect the demand for consumer goods?

    Understand how key economic factors such as inflation, unemployment, interest rates and consumer confidence affect the level ... Read Answer >>
  3. How should an investor interpret the consumer and business confidence index when ...

    Learn how investors benefit from watching the consumer and business confidence indexes, along with other key metrics, when ... Read Answer >>
  4. How do changes in interest rates affect the spending habits in the economy?

    Examine the factors that typically determine how consumers react to interest rate changes in terms of increasing their levels ... Read Answer >>
  5. How does revolving credit differ from a general line of credit?

    Examine the consumer goods sector, which accounts for nearly one-third of consumer spending, and learn which goods account ... Read Answer >>
  6. How can consumer durables act as economic indicators?

    Learn how consumer durables act as economic indicators. Consumer durables are products with life spans of at least three ... Read Answer >>
Related Articles
  1. Insights

    Understanding The Consumer Confidence Index

    We look at this closely watched economic indicator to see what it means and how it's calculated.
  2. Insights

    Consumer Confidence Index

    The Consumer Confidence Index is the result of a monthly survey of 5,000 U.S. households by the Conference Board that measures how optimistic or pessimistic consumers are about the economy's ...
  3. Insights

    Why Consumer Confidence Matters

    As consumer spending is a dominant component of the U.S. economy, how consumers feel about the economy can become self-fulfilling.
  4. Insights

    How To Read The Michigan Consumer Sentiment Index

    The Michigan Consumer Sentiment Index has provided a key leading indicator for investors and economists for decades. This respected index is published monthly from the results of random telephone ...
  5. Investing

    Mattel Stock: 4 Things to Watch (MAT)

    Here are the four leading economic indicators that could affect shares of Mattel Inc. in the next six months, but which ones will have the most impact?
  6. Trading

    Consumer Confidence: A Killer Statistic

    The consumer confidence is key to any market economy, so investors need to learn the measures and how to analyze them.
  7. Insights

    5 Factors That Could Send The United States Economy Into A Double-Dip Recession

    A decline in consumer confidence and stock market correction could be enough to sink the economy again.
  8. Retirement

    Highest Number of Americans Ever Scared They're Too Poor to Retire

    Retirement confidence lags – maybe because nearly half of American workers have saved less than $25,000.
RELATED TERMS
  1. Michigan Consumer Sentiment Index - MCSI

    A survey of consumer confidence conducted by the University of ...
  2. Consumer Sentiment

    A statistical measurement and economic indicator of the overall ...
  3. Expectations Index

    A sub-index that measures overall consumer sentiments toward ...
  4. RBC Consumer Attitudes And Spending By Household Index - RBC CASH Index

    An index based on a monthly national survey of consumer attitudes ...
  5. Consumer Cyclicals

    A category of stocks that rely heavily on the business cycle ...
  6. Consumer Discretionary

    A sector of the economy that consists of businesses that sell ...
Hot Definitions
  1. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  2. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  3. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  4. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  5. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  6. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
Trading Center