The Consumer Confidence Index generally is considered to be a reliable measure of consumer sentiment, but despite its expectations component, it largely reflects what we already know.

In January 2020, the Investment Strategy Group report titled How You Feel Matters focused on various measures that attempt to gauge sentiment toward the economy and the equity market. One of the best known of these measures was released this week.

Through its monthly survey of 5,000 households, the Conference Board’s Consumer Confidence Index attempts to quantify consumers' opinions on current conditions and future expectations for the economy. It does this by asking a series of questions about current business and employment conditions, as well as questions about expectations for those conditions and income six months from now. Positive, negative, and neutral responses are compiled. A series of computations that use a 1985 base produce the Present Situation Index and the Expectation Index. The index values for all five questions are then averaged to form the Consumer Confidence Index.

 

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