What Is the Consumer Confidence Index (CCI)
While the economy can undoubtedly be eventful and unpredictable at times, certain economic indicators can help traders, investors, analysts, and consumers navigate the markets more effectively and efficiently.
Similar to other indicators like the Gross Domestic Product (GDP), Nonfarm Payrolls (NFPs), the Purchasing Managers Index (PMI), and the Consumer Price Index (CPI), the Consumer Confidence Index (CCI) can provide valuable insight into the state of the economy too. So what is CCI, how does it affect the markets, and what does it reflect about the economy? Here’s what you need to know about CCI reports and the consumer confidence index definition:
Understanding the Consumer Confidence Index (CCI)
The CCI offers insights into the anticipated future patterns of household spending and saving. Or, in other words, it attempts to gauge the possible developments and spending habits of consumers and households.
The data is derived from responses that reflect people's expectations regarding their financial circumstances, their perceptions of the overall economic climate, their views on unemployment rates, and their ability to save money.
What Can the Different Levels of CCI Indicate?
CCI levels of 100 or over, may suggest that consumers are optimistic about the future of the economy, and therefore, may be less likely to save their money and more likely to make significant purchases within the coming year. In contrast, readings below 100 indicate a more negative outlook on future economic trends, which could lead to a greater inclination to save and a reduction in spending.
Why Is the Consumer Confidence Index Important to Traders?
Similar to other economic indices and data, the CCI can be taken into account when trading or making any investment decisions. This is due to the fact that since it may reflect economic conditions and consumer confidence as well as spending habits, it might directly or indirectly influence the overall market. This report can also include an overview of inflation conditions and economic expectations which may also shift the markets and create volatility in some cases.
How Does the CCI Impact Forex Markets?
While CCI data may affect various market sectors ranging from stocks to indices and commodities, it might be particularly impactful on the Forex market. This is because this report is highly esteemed and utilized by the Federal Reserve, which means that it might play a direct role in determining interest rates and other financial and monetary policies.
Accordingly, low CCI levels can indicate a pessimistic outlook which may increase the possibility of slowing interest rates, hence causing the US dollar’s value to decline and for more Forex traders to sell the dollar as they look for stronger currencies. On the flip side, optimistic and high CCI levels may increase the chances of higher interest rates and a stronger dollar.
What Is the CCI Survey and How Is the CCI Calculated?
The CCI is a consumer confidence survey-based indicator that is published on a monthly basis by the US Conference Board. The board publishes and gathers data for the CCI survey which is based on 5 questions two of which are about current economic conditions and the other three are based on future economic conditions.
The first set of questions, called the Present Situation Index, aims to gauge respondents' evaluation of the current state of business and employment conditions. The second set of questions called the Expectations Index, seeks to understand respondents' expectations for business conditions, employment conditions, and total family income six months from now.
Respondents can choose to answer each question with a positive, negative, or neutral response.
After collecting the data, the surveyors calculate the relative value of each question, which is then compared to the relative value of the same question in 1985, set as the benchmark of 100. For each question, the relative values are compared to produce an "index value."
Latest Consumer Confidence Index (CCI)
The latest CCI figures were published on December 26, 2023, and reached 110.7 which is above November’s 101.0 level hence showing that consumers are more confident regarding the business outlook than they were in 1985.
In addition, On December 2023, the Present Situation Index increased from 136.5 to 148.5, while the Expectations Index rose from 77.4 to 85.6. Which showed a more optimistic outlook in all income groups. Despite the current positive outlook on the current economic situation, the latest CCI figures show that consumers remain concerned about rising prices. (Source: Investopedia)
Consumer Confidence Index Criticism
While the CCI can be an informative economic indicator to many people, there are some that believe that this indicator has its own drawbacks. Those who critique the CCI hold the belief that this survey does not include the necessary information needed to reflect business, finance, and labor conditions for the future nor is it very useful for forecasting the future.
2024’s Upcoming CCI Reports
All in all, despite its possible drawbacks, the CCI is ostensibly important and could impact different market sectors. Accordingly, traders may want to keep track of any upcoming CCI releases in 2024 to see how those can influence the market and the economy as a whole.
On the last Tuesday of each month, the Conference Board publishes its Consumer Confidence Index. Here are the scheduled CCI releases in the upcoming months:
January 30, 2024
February 27, 2024
March 26, 2024
April 30, 2024
May 28, 2024
June 25, 2024
