What Is the Consumer Confidence Index (CCI)?
The Consumer Confidence Index (CCI) is a survey, administered by The Conference Board, that measures how optimistic or pessimistic consumers are regarding their expected financial situation. The 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 an economic slowdown or recession.
- 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.
- The CCI 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.
Consumer Confidence Index
Understanding the Consumer Confidence Index (CCI)
The CCI is released on the last Tuesday of every month, and it 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 conditions, and their expectations for the business, employment, and income for the next six months. CCI is conducted 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 has a responding sample size of 3,000 questionnaires. The survey was initially conducted every two months starting in 1967 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 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 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.
Latest Consumer Confidence Index (CCI)
As of Jan. 31, 2023, the Conference Board's February CCI stood at 107.1, down from 109 in December. A current CCI above 100 means consumers are more optimistic than the benchmark CCI of 100 set in 1985. Conversely, if the current CCI were below 100, it would mean consumers were more pessimistic than in 1985.
The current business and labor market, measured by the Present Situation Index, rose to 150.9 versus 147.4 in the previous month. However, the Expectations Index fell to 77.8 from 83.4 in the prior month.
Although consumer confidence dropped in January from the previous month, it is still above the level that was reported in July 2022, which was the lowest for the year. Consumers aren't optimistic about the business outlook but remain confident that their incomes will remain steady. Plans to purchase items like cars and appliances are flat but there are fewer consumers who are considering putting off buying a home.
Criticisms of the Consumer Confidence Index (CCI)
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 as a warning of turning points in economic activity.