abc news description

ABC News Consumer Comfort Index

Click here for chart

APPLICABLE TIME FRAME(S):

LONG

UPDATE SCHEDULE:

Weekly

REPORTING DELAYS:

None

EXPLANATION:

The ABC CCI is based on Americans' ratings of their current finances, the national economy and the buying climate.

The CCI is a rolling average based on telephone interviews with 1,000 randomly selected adults nationwide conducted over the previous four-week period.

The index is based on three core questions. These questions ask respondents to rate the condition of the national economy, the state of their personal finances and whether now is a good time to buy things. Margin of sampling error for the results of each of the component questions is plus or minus 3 percentage points.

The index is computed by subtracting the negative response to each question from the positive response. The three resulting numbers are then averaged. The scale can range from +100 (if every respondent gave positive responses to each of the three questions) to -100 (if all respondents expressed consistently negative views.).

GUIDELINES:

Like most other sentiment surveys, this is a coincident indicator. When times are good, consumers are happy; when times are bad, they are less optimistic. The keys to watch for as investors are for those times when divergences occur between sentiment and the stock market, and more especially times of extreme confidence or pessimism.

At the extremes, the survey is a decent contrary indicator. When the survey has recorded readings in excess of 0, it has coincided with times of economic expansion and good stock market performance. Generally, stocks under-perform after such occurrences.

When the survey has recorded readings under -20, it has coincided with difficult market conditions. However, by the time it is recognized and extrapolated by consumers, we're usually nearing the trough and the stock market tends to bottom not long after.

ADDITIONAL RESOURCES:

ABC News and The Washington Post (Washington Post)