Consumer confidence measures how optimistic or pessimistic consumers are about the economy and their personal financial situation. Since consumer spending drives roughly 70% of U.S. GDP, these surveys are critical leading indicators.
Two Major Surveys
The Conference Board's Consumer Confidence Index (CCI) surveys 3,000 households monthly and is more labor-market focused. The University of Michigan's Consumer Sentiment Index (UMCSI) surveys 500+ consumers and emphasizes personal finances and inflation expectations. Both have 1966 as the base year (=100).
Key Sub-Components
Why Markets Care
A sharp drop in consumer confidence can foreshadow reduced spending, slowing GDP, and potential recession. The Expectations component of the Conference Board Index has correctly predicted 7 of the last 8 recessions when it drops below 80.
Historical Context
The Conference Board CCI plunged to 25.3 in February 2009 (its all-time low since the index began in 1967) during the Global Financial Crisis. During COVID, it dropped to 85.7 in April 2020. Michigan Sentiment hit 50.0 in June 2022 β its lowest in the survey's 70+ year history β driven by surging inflation fears.
Limitation
Sentiment surveys don't always translate to actual spending behavior. 'Vibecession' became a popular term in 2022-2023 when sentiment was deeply negative but consumer spending remained resilient.