Consumer confidence surveys are key indicators into the overall health of the economy. When people feel confident about the stability of their incomes it influences their spending and saving activities.
Therefore, reports such as Consumer Confidence Index (CCI) and University of Michigan Consumer Sentiment (MCSI) are of particular interest to traders since these reports include inflation expectations and outlooks for consumers.
The CCI survey is conducted monthly and contains about 50 questions that track different aspects of consumer attitudes toward current and future business conditions, current and future employment conditions, and total family income for the next six months. This report is highly regarded by the Fed and can be a key factor in determining U.S. monetary policy.
The University of Michigan’s MCSI survey is conducted by phone and tracks consumer opinions of their own finances and the near- and long-term economy. Preliminary data is released on or around the 10th of each month, with final and complete data released on or around the first of the following month.
While these reports provide a snapshot of consumer confidence as a whole, it can also be useful to relate consumer confidence to specific sectors of the economy, such as manufacturing versus non-manufacturing. In some instances, certain parts of the economy will perform better than others, and additional data can help traders to operate with a more sector-specific sense of consumer sentiment.
One example of sector-specific report is the Philadelphia Fed Survey, which tracks the manufacturing sector. Other reports of similar nature include US Chicago PMI, Manufacturing, Services and Composite PMIs.
By gauging consumer confidence surveys against sector-specific performance, traders and the Fed alike can gain a broader understanding of the consumer’s view of the economy, while keeping an eye on the possibility of inflation.
As you can see there are a number of factors to think about when trading U.S. confidence surveys but with a little insight and thorough preparation these numbers provide numerous opportunities for traders.