Consumer Confidence Index (CCI) is defined as the measure of how optimistic or pessimistic consumers are. It is normally based on their activities of savings and spending. It is extracted from the survey results. Since it forms the basis of any market economy, thus traders are required to gain knowledge of these measures. They should also study how to analyze them.
If we analyze the Global Consumer Confidence country wise, it is clearly reflected that a large difference exists all around the world. One of the major indicators of economic trends in a mingled global economy is the tracking of international consumer confidence.
The Consumer Confidence Index is computed on monthly basis depending upon household survey of consumers’ opinions on current conditions and future expectations of the economy. 40% of the index is based on opinions on current conditions, whereas the remaining 60% depends upon the consumers’ expectations of future conditions.
The Consumer Confidence Index (CCI) is calculated every month by conducting a survey of 5000 households by the Conference Board. The survey basically consists of three different headline figures. These three headline figures include how the consumers see the economy currently, how the consumers sense the general economy is moving and how the consumers perceive the things in six months from the time of survey. The survey participants are required to reply each question as “positive”, “negative” or “neutral". The results are then compiled and an index value is calculated for each question separately. The average of the index values of all the questions is taken to compute the Consumer Confidence Index.
In very simple words we can say that the economy grows and consumers spend more money when their confidence is trending up, indicating higher consumption. Drop in consumer confidence is an indication of slowing economic growth. It may be concluded that the economy is headed into trouble.
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