The consumer confidence index is an index that is used to measure the consumer sentiments and satisfaction regarding current or future economic conditions of a country or a city. This index is based on a monthly survey that is conducted by the Consumer Conference Board. One thing must be noted that consumer confidence index is not the same as consumer sentiment index that is published by Michigan University.
Example of Consumer Confidence Index
Let’s take an example of a US company ABC that conducts a survey each month in which almost 5000 people take part. This survey is conducted in conjunction with consumer conference board that is a non-profit organization conducting business related research. The questions asked by the survey are as under:-
- Appraisals regarding present business and employment conditions
- Expectations regarding business development and employment in next six months
- Are consumers planning to buy car, house, appliances or other expensive items in next six months
- Vacations plans regarding coming future
- What consumer expect regarding inflation, interest rates, and prices of stocks in the coming year
The options of response for the consumer range from Yes, No, Better, Worse, Same, Don’t Know etc. The index is calculated on the basis of percentage of the positive response as a percentage of all the responses given by the people. These percentage values are compared with the benchmark values of the board that were calculated in 1985. These results are also categorized according to the age, gender, income, type of job and geographic location of the consumer.
Importance of Consumer Confidence Index
The consumer confidence index is important as it shares the optimism and the satisfaction of the consumer regarding the present or the future economic conditions of the region. The notion of this index is that when consumer feels satisfied and optimistic they tend to spend more that ultimately supports the economy.