Introduction to Consumer Confidence Measures

The three most prominent measures of consumer confidence in the U.S. economy are:

• The University of Michigan’s Index of Consumer Sentiment (ICS), established in 1946.
• The Conference Board’s Consumer Confidence Index® (CCI), established in 1967.
• Bloomberg’s Consumer Comfort Index (COMF), established in 1985 and originally sponsored by ABC News, before transitioning to Bloomberg in 2011.

All average the results of 3 to 5 questions. The ICS and CCI each pose 5 questions to consumers: 2 questions about the present condition of the economy and 3 questions about expectations. In contrast, the COMF has only 3 questions, each focused on the present condition of the economy. [Click the graphic for a larger version.]

Besides different questions, many other aspects of the indices differ. Most important is sample size and mode of interviewing: the ICS relies on 500 monthly telephone interviews, the CCI is a monthly mail survey sent to 5,000 households (of which 3,500 typically reply), and the COMF uses a 4-week rolling average of 250 telephone interviews.

Both the ICS and CCI have renormalized their results during their history: for the ICS, 100 = consumer confidence in the month of December 1964; for the CCI, 100 = consumer confidence for the year 1985. In contrast, the scale for COMF is -100 (every respondent rates the economy poorly across all 3 questions) to +100 (every respondent rates the economy highly across all 3 questions).

The predictive power of U.S. consumer confidence measures have been analyzed for many different economic variables:

• GDP – The correlation between consumer sentiment and GDP growth: “Variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of [GDP].”
• Consumption – Growth in consumption above and beyond changes in labor income.
• Durable goods spending – The interrelationship between household spending on durable goods and consumer sentiment, with greater confidence leading to more willingness to incur debt.
• Eurozone consumer confidence – A leading indicator of consumer sentiment in the Eurozone, reflecting the large role the U.S. consumer plays in the world economy.

The challenge with such confidence measures is that consumer sentiment both shapes and reacts to economic changes.

While most of the above studies were based on the ICS, an investigation by the Federal Reserve Bank of New Yorkfound that the CCI offered greater forecasting power for most categories of spending.

Langer Research Associates, creators of COMF, report the following correlations:

In our work, we are less concerned about the relative merits of each separate index, finding each of them to offer value. Accordingly, we calculate the CCAI, the Consumer Confidence Average Index, across all three measures.

Author Notes:

Jeffrey Henning

Jeffrey Henning, IPC is a professionally certified researcher and has personally conducted over 1,400 survey research projects. Jeffrey is a member of the Insights Association and the American Association of Public Opinion Researchers. In 2012, he was the inaugural winner of the MRA’s Impact award, which “recognizes an industry professional, team or organization that has demonstrated tremendous vision, leadership, and innovation, within the past year, that has led to advances in the marketing research profession.” In 2022, the Insights Association named him an IPC Laureate. Before founding Researchscape in 2012, Jeffrey co-founded Perseus Development Corporation in 1993, which introduced the first web-survey software, and Vovici in 2006, which pioneered the enterprise-feedback management category. A 35-year veteran of the research industry, he began his career as an industry analyst for an Inc. 500 research firm.