Present Situation Index

DEFINITION of 'Present Situation Index'

A subindex that measures overall consumer sentiments toward the present economic situation and is used to derive (about 40% of) the Consumer Confidence Index, a widely used economic indicator. The sub-index is compiled from data gathered from a survey of 5,000 households on questions regarding current business and employment conditions. Also known as "Current Situation Index".

BREAKING DOWN 'Present Situation Index'

The Conference Board conducts this survey, in which participants are asked if they feel that current business conditions are good, bad or normal, and if they feel that current employment conditions are plentiful, not so plentiful or hard to get. Businesses use this sub-index to give themselves an idea about current market conditions, which allows them to make more informed business decisions. Once an appraisal of the present situation is conducted and a value calculated, it is combined with another sub-index called the Expectations Index to form the Consumer Confidence Index. For example, if the survey showed current business conditions as good and current employment conditions as plentiful, an economist may view this as a positive signal that the economy is in recovery.