CB Consumer Confidence Index

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Consumer Confidence Index displays the level of consumer confidence in the stability of the country’s economy. The index is based on a monthly survey of about 3,000 households (the sample covers the entire country). The index allows assessing the financial status, purchasing power and confidence of an average consumer. The index is calculated by the Conference Board, the non-profit research organization.

The questionnaire includes 5 questions. Two questions are connected with current economic conditions: general business conditions and employment. Three more questions reflect consumer expectations regarding changes in business conditions, employment and household income for the next 6 month. Respondents evaluate these components as good, bad, or medium. Since 60% of the survey has to do with expectations, the indicator is considered to be a leading market indicator. It is included in the calculation of the Leading Economic Index.

A strong report on consumer confidence, especially when economy slows down, can sharply push currency markets. The growth of consumer confidence suggests that people will spend more and will make large purchases (for example, a car or a house). This will lead to an increase in economic activity and an increase in consumer spending. Also, the growth of consumer spending may lead to inflationary growth. Therefore, the Consumer Confidence Index is usually closely monitored by professional economists.

However, consumer confidence is a very subjective estimate, which depends on the current mood. Therefore, the results should be interpreted cautiously. Many economists evaluate the moving average of the index over 3 to 6 months. If it shows a steady growth or decline, analysts speak of a trend.

A higher than expected index growth may cause a short-term dollar volatility in the upward direction.

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