This index is important to the notion that consumer expenditures are a critical component of aggregate demand for the macroeconomy. Changes in consumer confidence and attitudes affect consumer expenditures, which then affect the overall performance of the economy.

In other words, if consumers are more confident, then they spend more and the economy is likely to expand. If consumers are less confident, then they spend less and the economy is likely to contract.

Consumer Confidence Survey

1. An appraisal of current business conditions.
2. Expectations of business conditions in six months.
3. An appraisal of current employment conditions.
4. Expectations of employment conditions in six months.
5. Expectations regarding total family income in six months.

In addition to the five questions used to calculate overall consumer confidence, the Consumer Confidence Survey also poses questions dealing with intended purchases for automobiles, houses, and major appliances. Other questions inquire about vacation plans and expectations of inflation, interest rates, and stock market prices.

The survey is conducted in such a way that it provides reliable information that can be differentiated by age, income, and geographical location.

A Family of Three

• Consumer Confidence Index: This is the most noted index generated by the study. It is a simple average of all five consumer attitude questions indexed against the relative value for 1985. A Consumer Confidence Index of 85, for example, means that the current level of consumer confidence is 85 percent of the level measured in 1985.


• Present Situation Index: This index is calculated as an average of the relative responses to questions 1 and 3. Both questions reveal how respondents feel about current business and employment conditions. It too is indexed against the relative value for 1985.


• Expectations Index: This index is calculated as an average of the relative responses to questions 2, 4, and 5. These three questions reveal expectations that respondents have about future business and employment conditions and personal income. It is indexed against the relative value for 1985, as well.