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CONSUMER CONFIDENCE. Presented By: Courtney Cooper Sheyla Martinez. What Is It?. The index measures how consumers feel about the upcoming six months and their plans to make purchases (or not) The Consumer Confidence Index is issued by the Conference Board.

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Consumer confidence l.jpg

CONSUMER CONFIDENCE

Presented By:

Courtney CooperSheyla Martinez


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What Is It?

  • The index measures how consumers feel about the upcoming six months and their plans to make purchases (or not)

  • The Consumer Confidence Index is issued by the Conference Board.


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Consumer Confidence Measure Indicator

  • Frequency: Monthly Report

  • Published by: The Conference Board, University of Michigan, ABC News

  • Period coverage: varies

  • Market significance: moderate

  • Leading indicator of consumer spending


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Measuring The Index

  • The Conference Board surveys 5,000 U.S. households, each month

  • The 5 questions ask opinions about:

    • Current business conditions

    • Business conditions for the next 6 months

    • Current employment conditions

    • Employment conditions for the next 6 months

    • Total family income for the next 6 months

  • The questions are answered as positive, negative or neutral.


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Measuring The Index

  • The index values for all 5 questions are averaged, with weight, to form the Consumer Confidence index.

  • The average values for questions 1 & 3 form the Present Situation index.

    (weight = 40%)

  • The average values for questions 2, 4,& 5 form the Expectations index. (weight = 60%)


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Measuring The Index

  • The relative value is calculated as each question’s positive responses divided by the sum of its positive and negative responses.

  • The benchmark relative value, 100, was established in 1985.

  • The comparison between the relative value and the benchmark creates the index value.


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Consumer Confidence U.S. Regions

  • The index is calculated for the Unites States as a whole and for each of the country’s 9 census regions:

    • New England: Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, Vermont

    • Middle Atlantic: New Jersey, New York, Pennsylvania

    • South Atlantic: Delaware, Maryland, Washington DC, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida

    • East North Central: Ohio, Indiana, Illinois, Michigan, Wisconsin

    • East South Central: Kentucky, Tennessee, Alabama, Mississippi

    • West North Central: Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Kansas

    • West South Central: Arkansas, Louisiana, Oklahoma, Texas

    • Mountain: Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, Nevada

    • Pacific: Washington, Oregon, California, Alaska, Hawaii



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Keys To Interpreting The Data

  • It is important that you look at the trend rather than the month to month change.

  • Watching the trend will help cancel out sapling errors.


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The Consumer Confidence Index

Recession

Job cuts

WAR

Terrorist

attacks


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Latest Release - April 24, 2007

  • The Consumer Confidence index decreased from 108.2 (March) to 104.0 (April)

    • The Present Situation index decreased from 138.5 (March) to 131.3 (April)

    • The Expectations index decreased from 87.9 (March) to 85.8 (April)


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The Consumer Confidence Index April 2006-2007

108.2

109.8

104.0



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The Present Situation Index April 2006-2007

138.5

136.2

131.3


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Latest Release – April 24, 2007

  • The 1 year measure of consumer inflation expectations rose from 4.9% (March) to 5.2% (April)

  • The EUR-USD is above the 1.36 mark

  • The USD-JPY is under the 118.5 mark


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Latest Release – April 24, 2007

  • The number of people who planned to buy homes within 6 months decreased 0.5%

    - from 3.2% (March) to 2.7% (April)

  • The number of people who planned to buy cars within 6 months increased 0.6% - from 5.4% (March) to 6.0% (April)



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The Expectations Index April 2006-2007

92.3

87.9

85.8


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The Implied Job Strength Index

  • Correlates closely with joblessness, inflation, and real incomes

  • The difference between “jobs are plentiful” and “jobs are hard to get” creates the Implied Job Strength index.

  • This index decreased 4 points – from 11.4 (March) to 7.4 (April).

http://money.cnn.com/2007/04/24/news/economy/consumer_confidence.reut/


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Why Should We Care?

  • Consumer spending accounts for roughly two-thirds of our economy.

  • Consumer consumption represents about 56% of the GDP

    • Durable goods, non-durable goods, and services.

  • Consumer sentiment is a predictor of how certain industries may do in the coming months.


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What Will The Fed Do?

  • Although consumer confidence has dropped, the Federal Reserve will not make any changes to the interest rate.

  • They will continue to monitor the changes in inflation.