The Consumer Confidence Index is based on the survey of 5,000 households in the USA. It is conducted by the Conference Board, and it aims to measure the attitude of consumers in the current or future performance of the economy.
When the index is low, it is expected that there is an increase in spending. But when the index is high, there will be an increase in spending on goods and services. Consumer confidence is an important indicator of the economy since consumer spending accounts for about two-thirds of gross domestic product.
Meanwhile, consumer confidence measures a wide range of consumer attitude. This includes expectations of the general economic situation and household’s financial positions. It also includes views of the consumer on making major household purchases such as a brand new house and a car (and car insurance of course).
The US Consumer Confidence Index for December 2016 surged almost four points to 113.78, which is the highest level in more than 15 years. People felt better about the economy and a lot of it has to do with the change of leadership. Companies are bringing home the jobs in the United States, and this is probably because of President Donald Trump and other factors.
President Trump in the rise of Consumer Confidence Index
There is suddenly more hope for Americans these days. Consumers express optimism regarding the outlook for business, jobs and personal income prospects. Their assessment of current business and labor market conditions have improved considerably.
Consumers and businesses feel current economic conditions have improved over the recent period.
For one, small business owners look forward to the possibility of tax reform. Second, they look forward to business friendly policies and renegotiating trade deals. Lastly, they look forward to expanding energy production as promised by the Trump administration.
Other factors on Consumer confidence
On the other side, consumer confidence is also based on several factors and not by President Trump’s promises alone.
First, Labor Market strength could encourage the Federal Reserve to raise interest rates. Second, the consumer price index, income gains, housing market, credit and personal savings rate have all increased recently thus affecting the overall consumer confidence of the US.
Rise and Fall of Consumer Confidence
It must be noted as well that falling confidence could be a symptom of recession and not the other way around; just like in 2008 financial crisis. Meanwhile, a fall in consumer confidence can lead to an increase in savings. When confidence returns, people may spend these savings on items they have delayed buying.
Also, a decrease in confidence may cause firms holding back on investment. But, in the future, this could lead to a mini-boom in investment as all the delayed investment comes back into the economy.You can also see the confidence increasing with the rise of more review types of websites hitting the market everyday. These can be things about portable basketball hoop review & best in ground basketball hoop sites all the way to new car types of review sites. A great indicator that people are buying more things and thus having more confidence.
In a nutshell, Consumer confidence is only a survey and people may become optimistic or pessimistic for reasons not related to a change in economic fundamentals or even the change of leadership such as the reign of President Trump. However, let us make these indicators a challenge so Americans can live a better life in the next years to come.