The Consumer Confidence Index rebounded in April to 128.7 — compared to 127.1 in March — and that combined with an uptick housing sales this month indicate a resurgence in the economy.
The index had hit a 17-year high of 130 in February, only to slide to 127.7 in March, reflecting a reduced outlook about current business conditions and the prospects for the next six months.
This index reflects the activity for the month in which it is announced, and is based on a survey of 5,000 households — conducted by Nielsen on behalf of the Conference Board — on how optimistic or pessimistic respondents feel about the economy’s current and future performance.
The Consumer Confidence Index and the Economy
Like the name of the index suggests, it provides a measure of consumers’ confidence in the economy, and as such provides a gauge on people’s likelihood to spend money. Think of this as the consumption aspect of the gross domestic product.
The survey looks at households’ plans for major purchases, their current economic situation and their expectations for the future.
With consumer spending accounting for about 70% of American economic activity, the monthly announcement of the consumer confidence index has a tendency to move the markets — stocks and bonds alike.
Investors see the index as an indicator of overall economic growth (or lack thereof).
Related Indices
Meanwhile, the Consumer Confidence Index isn’t the only measurement of consumer confidence, although its announcements tend have a stronger impact upon the markets than the others.
These others include the University of Michigan Consumer Sentiment Index. It also comes out during the last week of the month, only on a Friday instead of Tuesday like the Conference Board’s figure does.
Bloomberg has its own Consumer Comfort Index — and it comes out on a weekly basis. In contrast to the other two indices, Bloomberg’s comfort index has been climbing in recent months.
There’s an Average Index
This kind of contrast underscores why some find it helpful to look at an average of these three indices — that just so happens to be the Consumer Confidence Average Index, published by the Conference Board, the same entity that produces the Consumer Confidence Index.
Separate from all this is another figure, the Gallup Economic Confidence Index, which comes out daily — and additional versions of it come out weekly, monthly, and quarterly.
All of the aforementioned numbers help paint a picture of the economy, but none of them tell the whole story. However, they gain additional meaning and helpfulness when examined with other helpful metrics like gross domestic product, the consumer price index and employment statistics.
Readers, how confident do you feel about the economy right now — and how does that influence your appetite for spending?
Read More
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Jackie Cohen is an award winning financial journalist turned turned financial advisor obsessed with climate change risk, data and business. Jackie holds a B.A. Degree from Macalester College and an M.A. in English from Claremont Graduate University.
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