Updated: Mar 7
What is the Consumer Confidence Index?
A highly respected non-profit group called the Conference Board releases a monthly report in the form of a survey of over 5,000 households. The survey is made to measure financial well-being and confidence of the ordinary American consumer. The Index is split into different categories, the first is the Index of Consumer Sentiment, to measure how they feel currently.
The next is the Current Economic Conditions to measure how they feel overall about the economy, and the last is the Index of consumer expectations to measure how they feel the economy will be in half a year. In short, the Index helps measure how the general public feels about the economy, i.e., how likely they are to spend money.
Why it’s important for traders
The Consumer Confidence index is one of the most important reports, especially among currency markets. A strong CCI report when the economy is in a downtrend can boost the markets while a weaker than expected report can have the exact opposite. Bankers, Manufacturers, and governments all pay attention to the Consumer Confidence Index. For example, when strong Consumer Confidence reports are issued monthly, manufacturers may increase production quotas.
The Consumer Confidence Index is also a great long-term indicator for spending among the public as well as helping predict the GDP of a nation. However due to the small sample size of only 5,000 traders should look to many reports to help them predict possible long-term trends in the market, many traders look for the moving averages economists use, usually around six months of data before predicting an overall trend reversal.