Consumer confidence is a measure of how much consumers think they will be able to spend in the future, how they feel about their job prospects and whether they fear unemployment. It’s an important statistic that’s used by economists to track the health of economies. It also plays a role in the economy because spending leads to growth and when consumers are confident, they tend to spend more. The Conference Board is one organization that creates a national index of consumer confidence and global market research and consulting firm Ipsos compiles its own worldwide CCI using 24 countries’ domestic indices.
It can be difficult to understand what the number means and how it’s determined. The OECD says “The Conference Board’s Consumer Confidence Survey asks respondents five questions about their outlook for the future (both business and personal), their assessment of current economic conditions, their expectations for income and job security and their ability to save.” The responses are then scored and a figure is derived.
Some economists believe that the CCI is a lagging indicator that reacts to changes in other economic factors after they’ve already occurred. Others, however, believe that it is a leading indicator. They say that if the index is falling, it’s a sign that people are pessimistic about the future of the economy and will probably save more and spend less. This can weaken aggregate demand, which is the total amount of goods and services purchased in an economy.