What is the Consumer Confidence Index? And why should I care?

September 28, 2012 § 1 Comment

The consumer confidence index ‘fell’ in August to the lowest point since October of 2011. Why should I care? And what does it all mean jelly bean?

The Consumer Confidence Index is an economic measure of consumer optimism. There are actually several surveys that measure of confidence. This survey has two parts: 40% of the measure reflects consumers’ present concerns. To get an idea of how this works, ask yourself, how do you feel about costs (inflation), about your job and the stability of your income. The answers to those types of questions are reflected in the first part, the lesser percentage, of the consumer confidence survey.

The other 60% is a measure of your expectations. What do you think is going to happen? How will businesses fare? Do you plan on shopping for school? For the holidays? What do you think your neighbors or local businesses will do?

Why is the Consumer Confidence Index measured monthly?– Your vision of the future and the plans you may have to buy a car, or other higher ticket items, matters. Manufacturers make plans for how much to produce based on orders coming in and confidence surveys. Malls hire holiday help based on similar projections. If you are worried about your job, you see others losing their jobs, you won’t spend money. Then people who make the doo-dads you didn’t buy will be laid off. Those layoffs, in turn, may make you will feel even more nervous. Then you shop less…

When consumers are confident about work and the future they shop. They buy things and spend money. Because you are buying things, manufacturers sell out of products ready on the shelves. The doo-dad makers need more workers to make more things and add a third shift of workers. Those new hires buy things. Knowing your neighbors have work creates a buzz in the community and the ebullience creates more confidence.

Since consumer spending is about 70% of all ‘economic activity’ spending matters a great deal. When we buy bread, cars, pens and computers that ‘activity’ keeps money moving and the economy strong. So we measure confidence because its rise, or fall, cause ripples in our community, our region and the nation.

August’s number – was down to 60.6 It is the lowest number in nine-months. September’s index will be released September 25th  Is it up, or down…and it’s up.

(CR8503)

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