Consumer Confidence Index and Consumer Sentiment Index as Research Tools

A measure of the expectations of consumers concerning the coming six months is measured by the Consumer Confidence Index (also known as CCI). It also includes considerations about consumers' purchases plans.

The Consumer Sentiment Index (also known as CSI) is closely related to the CCI and has been developed by the University of Michigan. Both indexes measure the expectations for consumer spending. However, the CCI is more closely related to business activities.

Both the CCI and CSI should be closely watched by business and used as research tools. This is so, since consumer spending constitutes a big portion of the economy. Lower consumer spending has negative impact on the economy, whereas higher consumer spending has a positive reflection.

The CCI and the CSI provide a view on the future trends in consumer spending. Additionally, the CSI may provide information on how certain industries may do in the months to come.

Declining values of both the CCI and the CSI generally don't have a negative impact on non-cyclical stocks. What's more they tend to do well under such conditions. An example of a non-cyclical stock is toothpaste.

However, declining numbers have a negative impact on goods that are not of immediate importance to consumers. As a result companies that produce such goods may suffer negative effects.

The rising trend in consumer spending may lead to too much money chasing too few goods. The Fed may respond to this by a gradual and slow increase on interest rates.

You should pay attention to changes in these indexes every four to six months. Avoid examining them month by month since this will not provide you with an objective view. When you examine these indexes over periods of time you will be able to eliminate seasonal variations and sampling errors and thus have more reliable information on which to base your decisions.

Information on the CCI and the CSI can be found in a number of online sources. One of them is the Briefing.com. There you can find the future data releases as well as graphs that present historical trends.

Finally, you should not forget that the trends in the CCI and the CSI should be observed over longer periods of time. These indexes provide powerful predictors. Thus, if you manage to make a clear view of the meaning behind consumer spending you will be able to make better investment decisions.

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