The Consumer Confidence Index is one of those numbers that the government and economists eagerly await every month. Since consumer spending makes up about 70% of the US economy, it’s no wonder they want to pay attention to how the average consumer is feeling. The Conference Board, a non-profit business think tank, surveys thousands of Americans, crunches the data, and comes up with a number that represents how confident consumers are in the economy on a monthly basis. After March, the CCI number sits at 124.1, down 7.3 points from February. That’s a pretty significant drop, and a bit odd in such a strong economy. So, what does it mean?
In a time where we’re all scrambling for some indicator of the economic direction, many are latching onto numbers like this. Any slight dip in the barometer of the economy triggers flashbacks of the financial crisis. For that reason, it’s good to provide some context, as we can often get sucked into the relativity of our current situation. A score in the 120s is historically strong. In fact, anything over 100 generally indicates an expanding economy, so we look to be in pretty good shape. By comparison, the CCI in February of 2009 at the height of the financial crisis was 25.3, a far cry from where we now stand. That being said, a sudden drop like this raises some eyebrows. So, should we be worried?
In a recent interview with Planet Money, Lynn Franco, Director of Economic Indicators and Surveys for The Conference Board, tried to provide some clarity on the matter. “Consumers have a very accurate record at forecasting recessions,” she said plainly. It makes sense. As such a large part of the economy, consumers are a driving force when they’re confident and a vacuum when they’re uncertain. Before jumping to conclusions about this downtick, though, it’s important to remember the overall trend. “We’re still at a strong level which indicates that the economy is going to expand,” Franco says. “But we’ve had a bit of a large decline in the present situation which is a bit unusual,” she adds, pensively. It seems like we’re going in circles here.
It tough to nail down whether or not things are going to change, but for now, the outlook is pragmatically optimistic. “These things change month to month,” Franco reminds us. With haunting memories of the financial crisis still fresh in our memories, it’s easy to get jumpy. If my two cents means anything, I think that may even explain the sudden drop in consumer confidence. We’re conditioned to expect the worst now. Things have been good for so long that it seems impossible that they could continue without something looming on the horizon. Consumers might not be losing confidence, per se, but just being cautious. This is certainly a watershed period for our country, so for now, we just have to continue to monitor the numbers diligently and maintain that measured optimism.
We at Listen360 are all about that precious data that lets us understand how consumers are feeling and how we can better relationships and communication. I couldn’t possibly dive into the invaluable gauge that is the CCI without pointing out that you can scale this premise for your own business. Just as economists pay close attention to consumer feelings, you should be gauging your customers’ feelings. It’s difficult to sway the attitude of an entire country of consumers, but you’re much more empowered when it comes to strengthening your relationship with your customer base. NPS is to your business what CCI is to the economy. It wouldn’t hurt to check it out.
To hear the entire Planet Money interview with Lynn Franco, click here.
Since I wrote this a couple of weeks ago, we’ve seen the jobs report for March. The results were promising. Job growth bounced back from a troubling February. Wages continue to rise, and most industries added jobs. These factors can lead us to expect a boost in the CCI next month, but hey, I’m no economist.