This index incorporates 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.

Survey of Consumers

1. An evaluation of the respondent's current financial situation.
2. Expectations of the respondent's financial situation in one year.
3. Expectations of the economy's overall financial situation in one year.
4. Expectations of the economy's overall financial situation over the next five years.
5. An evaluation of the economy's overall suitability for making major purchases.

In addition to the five questions used to calculate overall consumer confidence, the Survey of Consumers also poses questions dealing with government stabilization policies; expectations of economy-wide unemployment, interest rates, and inflation; expectations of family income; and possible plans to purchase housing, cars, furniture, appliances, and other durable goods.

A Family of Three

• Index of Consumer Sentiment: This is the primary index generated from the study. It is calculated by summing the relative scores for all five questions and dividing by the relative score in the base year of 1966. (A constant value of 2.0 is added to the result to adjust for changes in the 1950s).


• Index of Current Economic Conditions: This index is calculated as an average of the relative scores to questions 1 and 5. Both questions reveal how respondents feel about current personal and economy-wide conditions. It too is indexed against the relative score for 1966 and a constant value of 2.0 is added.


• Index of Consumer Expectations: This index is calculated as an average of the relative responses to questions 2, 3, and 4. These three questions reveal expectations that respondents have about future personal and economy-wide conditions. It is indexed against the relative score for 1966 and a constant value of 2.0 is added, as well.