Consumer Confidence Index

What Is the Consumer Confidence Index?

The Consumer Confidence Index (CCI) is a monthly economic indicator published by the Conference Board that measures the degree of optimism or pessimism that consumers feel about the overall state of the economy and their personal financial situation. Based on a survey of approximately 3,000 households, it provides insight into consumer attitudes that influence spending decisions.

The index is divided into two sub-indices: the Present Situation Index, reflecting consumers' assessment of current conditions, and the Expectations Index, capturing their outlook for the next six months. The base year is 1985 (index = 100).

Why It Matters for Markets

Consumer confidence is a leading economic indicator because it captures the psychological state of the consumer, who drives approximately 70% of U.S. economic output. Shifts in confidence often precede changes in actual spending behavior, making the index valuable for forecasting.

Traders watch the monthly release closely, particularly the gap between the Present Situation and Expectations components. When the Expectations Index falls sharply below the Present Situation Index, it historically signals that consumers expect conditions to deteriorate, a pattern that has preceded most recessions.

The Conference Board's CCI is often compared to the University of Michigan's Consumer Sentiment Index. While both measure consumer attitudes, they differ in methodology and emphasis. The Conference Board survey focuses more on labor market conditions, while Michigan emphasizes financial conditions and inflation expectations. Significant divergences between the two surveys can provide additional analytical insight.

Limitations and Context

Consumer confidence is a sentiment measure, not a direct measure of economic activity. Consumers may express pessimism while continuing to spend, or express optimism while saving more. The relationship between confidence and actual spending is positive but imperfect.

Political partisanship has increasingly influenced confidence readings, with consumers of the party in power reporting higher confidence than the opposing party. This partisan gap can complicate interpretation, as shifts may reflect political events rather than genuine economic assessment. Analysts should focus on the overall level and trend rather than any single month's reading, and cross-reference with hard data like retail sales and personal spending.