What is Consumer Confidence Index (CCI)?
The Consumer Confidence Index is a survey, administered by The Conference Board, that measures how optimistic or pessimistic consumers are regarding their expected financial situation.
- The Consumer Confidence Index is a survey, administered by The Conference Board, that measures how optimistic or pessimistic consumers are regarding their expected financial situation.
- The Consumer Confidence Index (CCI) 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 a recession.
- The Consumer Confidence Index (CCI) is based on the Consumer Confidence Survey, which is a survey of 5,000 households, and is released on the last Tuesday of every month.
Consumer Confidence Index
Understanding Consumer Confidence Index (CCI)
The Consumer Confidence Index (CCI) 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 a recession.
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. Essentially, it is a barometer of the health of the U.S. economy and is based on consumers perceptions of current business and employment condition, and their expectations for business, employment, and income for the next six months. CCI is conducted for by Nielsen, a global provider of information and analytics on consumers' buying and watching habits.
The Consumer Confidence Index is based on the Consumer Confidence Survey, which is a survey of 5,000 households. The survey was initially conducted in 1967 every two months but changed to monthly tracking in 1977. There are five questions asked - two related to present economic conditions and three related to future expectations.
Present Situation Index
- Respondents’ appraisal of current business conditions
- Respondents’ appraisal of current employment conditions
- Respondents’ expectations regarding business conditions six months hence
- Respondents’ expectations regarding employment conditions six months hence
- Respondents’ expectations regarding their total family income six months hence
Each response can be answered with one of three responses: positive, negative, or neutral. There is also a present situation index, which is an average of two questions related to current economic conditions. The responses to the other three questions form the basis for the expectations index.
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 the benchmark because 1985 is the first year the index was calculated. This comparison of the relative values results in an "index value" for each question.
CCI - Leading or Lagging Indicator
While some in the economic community see the CCI as a lagging indicator, the Organization for Economic Co-operation and Development (OECD) considers consumer confidence to be 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 as a warning of turning points in economic activity.
In March 2020, The Conference Board announced that CCI had declined sharply to 120 from its February 2020 reading of 132.6. Both the 'present situation index' and the 'expectations index' also fell with the former posting a 167.7 for March 2020, vs 169 in the prior month, while the latter cratered to a reading of 88.2 vs the 108.1 posted in February 2020. According to Lynn Franco, Senior Director of Economic Indicators at The Conference Board
The Present Situation Index remained relatively strong, reflective of an economy that was on solid footing, and prior to the recent surge in unemployment claims. However, the intensification of COVID-19 and extreme volatility in the financial markets have increased uncertainty about the outlook for the economy and jobs. March’s decline in confidence is more in line with a severe contraction – rather than a temporary shock – and further declines are sure to follow.
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 Board is designed to help its members understand and navigate the most critical issues of the present time. The Board also conducts research and forums where business leaders convene. These insights feed into its research and meeting agendas.