The Conference Board Consumer Confidence

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APPLICABLE TIME FRAME(S):  

LONG

 

UPDATE SCHEDULE:

Monthly

 

REPORTING DELAYS:

None

 

EXPLANATION:

The Consumer Confidence Survey reflects prevailing business conditions and likely developments for the months ahead.  This monthly report details consumer attitudes and buying intentions, with data available by age, income, and region.

 

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.

 

The participants are asked to respond to five questions, which have remained consistent over the life of the survey. The questions ask the respondents to give their appraisal or expectations about the following:

  • current business conditions

  • business conditions six months hence

  • the current employment conditions

  • employment conditions in the next six months

  • their own total family income in the next six months

There are only three possible answers the participants can give to these questions: positive, negative or neutral. For each question, the Conference Board then calculates the proportion of positive answers to the total of positive and negative answers.

 

This proportion is benchmarked to the average of the same proportions that occurred in the year 1985, which is assigned a CCI value of 100. This benchmarked number is then the value of the headline Consumer Confidence Index for that month.

 

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 120, 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 60, 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:

The Conference Board (The Conference Board)

 

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