Consumer confidence

Release Date: Monthly, usually on the last Tuesday of the month
Release Time: At 11am US Eastern Time
Released By: Conference Board Inc


The CB Consumer Confidence report is a monthly report issued by the Conference Board Inc, and is a composite index survey which measures the economic rating of a country in the eyes of a consumer. It is also known as the Consumer Confidence Index. The report emanates out of the US.

A survey of about 5,000 households is undertaken by the Conference Board Inc team, and respondents are asked provide a rating on what they think of the current and future economic conditions of their country, using parameters such as availability of work, business conditions, and indeed the overall condition of the economy. Specifically, a questionnaire which focuses on five key areas is administered. The areas of interest are:

  • Present business conditions
  • Present employment conditions
  • Business conditions for the next 6 months
  • Employment conditions over the next 6 months
  • Total family income over the next six months

The questions with positive answers are divided by the aggregate number of questions answered positively and negatively, and the result is compared to those of 1985 (the year used as a benchmark), with an assigned value of 100.

This survey, known as the Consumer Confidence Survey®, is done via probability-design random sampling. Conference Board Inc has commissioned consumer information analytics firm Nielsen to handle the survey. Usually a cutoff date for the preliminary results is applied around the middle of the month.

Time of Release

The Consumer Confidence report is released monthly, usually on the last Tuesday of the month and covers surveys done for the current month in which the report is released. The time of release is 11am US Eastern Time. The data is released on the website of Conference Board Inc and also on independent news feeds from Bloomberg and Thomas Reuters.

Interpreting the Data

Ever since the global financial crisis, consumer confidence is now a big hit in the forex market, with high market impact unlike the years preceding 2007. The reason is not far-fetched. Consumer confidence is a leading indicator of consumer spending, and consumer spending accounts for a majority of overall economic activity and GDP. This is why some governments across the world (such as the US) actually wired money to every citizen so that they could spend to jumpstart their ailing economies.

If consumers are not confident about economic prospects, they tend to cut back on spending and this would hurt business concerns and the manufacturing sector. With manufacturers hit, jobs would be cut and more people would be thrown into the labour market with even less money, and the spending of this group of people would reduce even further. This self-perpetuating cycle could easily bring an economy to its knees.

A higher than expected reading means consumer confidence levels are high, and this is USD +ve. A lower than expected reading is indicative of waning consumer confidence which is bad for the US Dollar.

Conclusion

In order to trade the Consumer Confidence Index report, the trader’s entries must be based on the degree of deviation from the expected result. The more the actual reading deviates from the expected, the more tradable the news release is. It is not just a matter of making entries strictly on the basis of the actual reading coming out higher or lower than the expected.