Data Corner: Consumer Confidence Surveys

Article excerpt

Spending on goods and services accounts for roughly 70 percent of gross domestic product (GDP), making it the single biggest contributor. Theoretically, the way consumers perceive their current and future wealth can significantly affect their spending habits. For this reason, a number of surveys have been established in an attempt to measure consumer attitudes. The three main national indices are the Consumer Confidence Index from the Conference Board, the Consumer Sentiment Index from Reuters and the University of Michigan, and the Consumer Comfort Index from Bloomberg. Each of the surveys asks slightly different questions and thus can provide different perspectives on consumer attitudes (see the chart). Although consumer confidence measures tend to be volatile, when the indices are smoothed or combined, they can be useful predictors of future consumer behavior.

Overview of national surveys

Both the Consumer Confidence Index and the Consumer Sentiment Index are conducted monthly and have two main sets of questions. One set of questions focuses on the current state of the economy, and the other set focuses on expectations. The Consumer Comfort Index, however, is conducted weekly and focuses only on the current state of the economy (see the table).

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Question variation

The Conference Board's Present Situation Index is based on consumers' perception of local business conditions and local availability of jobs. The Reuters/University of Michigan Current Conditions index is slightly different in that it asks about attitude toward big-ticket purchases and whether personal finances have improved over the past year. Unsurprisingly, these indices do not end up being precisely correlated. The Bloomberg Consumer Comfort: Survey is somewhat hybrid in nature, probing consumers about their perception of the current state of the national economy, their personal finances, and the buying climate.

Both the Conference Board and the Reuters/University of Michigan surveys contain future components that contain fairly similar questions. The Conference Board asks respondents to project about six months ahead about business conditions, jobs, and income. The Reuters/University of Michigan survey also asks about changes to business conditions and income, but over a longer time horizon. …