How It Is Used
Manufacturers, retailers, banks and the government monitor changes in the CCI in order to factor in the data in their decision-making processes. While index changes of less than 5% are often dismissed as inconsequential, moves of 5% or more often indicate a change in the direction of the economy.
A month-on-month decreasing trend suggests consumers have a negative outlook on their ability to secure and retain good jobs. Thus, manufacturers may expect consumers to avoid retail purchases, particularly large-ticket items that require financing. Manufacturers may pare down inventories to reduce overhead and/or delay investing in new projects and facilities. Likewise, banks can anticipate a decrease in lending activity, mortgage applications and credit card use. When faced with a down-trending index, the government has a variety of options, such as issuing a tax rebate or taking other fiscal or monetary action to stimulate the economy.
Conversely, a rising trend in consumer confidence indicates improvements in consumer buying patterns. Manufacturers can increase production and hiring. Banks can expect increased demand for credit. Builders can prepare for a rise in home construction and government can anticipate improved tax revenues based on the increase in consumer spending.
Read more about this topic: Consumer Confidence Index
Famous quotes containing the word how:
“Funny aint it. Here I am worrying about a woman. Men dont worry much about women when theyre around. But when it gets way off from home like we are now, and where he knows hes going a lot further away ... I mean thats when a woman gets workin in your mind. You reckon youre a fool for not noticin before how, how big a part of things they be. There aint nothin like seein a womans face.”
—Dudley Nichols (18951960)