A consumer confidence index, or CCI, is a measurement tool that has to do with the current opinions of persons within a given country. Essentially, the consumer confidence index is a means of using a cross sample of the population to understand the current general feeling about the economy and what people believe will happen to the economy in the short term. In most cases, the consumer confidence index will make use of questions that help to capture the participants’ understandings about general business conditions, the current status of the job market, and the current relationship between income and making ends meet.
Along with national programs that compile a consumer confidence index, there are also attempts from time to time to prepare a global confidence index. However, many financial and political analysts tend to consider the attempt to prepare any type of global report of this nature to be limited in value. Generally, it is felt that the more focused national indexes provide data that is more useful for businesses, market analysts, and lending institutions.
In the United States, the program for compiling a consumer confidence index has been in place since 1985. Essentially, the structure for the program operates based on a scale of points, with a higher accumulation of points indicating that consumers are generally happy with the current financial picture and feel confident in spending money rather than choosing to hold off on major purchases. Lower scores indicate pessimism about the current economic climate as well as the future, and usually indicate that people are being more frugal with their resources in anticipation of rough times to come.
The US consumer confidence index is prepared on a monthly basis by the Conference Board, a research organization that is independent of any given industry or government affiliation. Including five thousand households around the country, the focus group for the study represents various aspects of the culture and economic range present within the country. According to the structure for this index, any consecutive two month period where the level falls below one hundred indicates a strong feeling among the citizens that a recession is on the way.
Many businesses make use of the consumer confidence index to structure their marketing and sales efforts based on the current findings of the research. Bankers and other lending institutions make use of consumer confidence reports of this nature to gauge lending activity and the potential for an upswing in loan defaults. Politicians tend to regard the consumer confidence index as an important tool in understanding the current mood of the general public about the economy and how well the government is doing with managing the current economic climate.
