Consumer Confidence
A measure of how optimistic households feel about the economy and their personal financial situations.
What is Consumer Confidence?
Consumer confidence measures how optimistic or pessimistic households are about the current and near-term economic environment, based on survey responses. The Conference Board Consumer Confidence Index (CCI) and the University of Michigan Consumer Sentiment Index are the two most widely followed measures in the US. Both surveys ask consumers about their perceptions of current conditions and expectations for the next six months across employment, income, and business conditions. Because consumer spending accounts for roughly 70% of US GDP, consumer confidence is a key leading indicator: high confidence tends to precede strong spending and economic expansion; low confidence often precedes recessions.
Example
The Conference Board Consumer Confidence Index fell from 128.9 in February 2020 to 85.7 in April 2020 as the COVID-19 pandemic began — a 34% drop in two months. This sharp decline preceded a significant contraction in consumer spending and foreshadowed the sharpest GDP contraction since World War II. Conversely, when the CCI rebounded above 120 in 2021 on vaccine rollouts and fiscal stimulus, consumer spending on goods surged, fueling one of the fastest economic recoveries on record.