“Consumer confidence” is an oft-cited measure of economic optimism. A non-profit called the Conference Board releases the measure on the last Tuesday of each month after surveying consumers about their assessment of the strength of current and future (six-month) financial and employment situations. The theory is that the Consumer Confidence Index (CCI) can be used as a “leading indicator” of economic conditions as people might spend more when they expect good economic times, and hunker down in expectation of rough times.
Unfortunately, the data does not bear this out. While the CCI is a leading indicator–ie strong CCI does tend to precede good economic times and a weak CCI precedes bad economic times–it is not provide any meaningful value above other measures. This makes intuitive sense–economic conditions are somewhat stable in that the economy does not frequently gyrate between depression and boom times every month. As a result, consumers merely predicting the current state of the economy continues to hold will be accurate most of the time, but the measure is not providing a lot of independent value that cannot be readily gleaned from more standard measures such as the unemployment rate, inflation and GDP growth. As a result, CCI is not generally a major factor in economic forecasts.