It also measures how people feel confident about the stability of their income. Your trust affects your economic decisions—as does your spending. Consumer confidence is therefore a key indicator of the economy's overall shape. When the economy expands, consumer confidence generally increases.
Explanation:
How Consumer Trust Surveys Work:
Many types of consumer confidence surveys are used all over the world but most of them work in the same way. Based on a random sample designed to be likely, the surveys merely ask a number of questions to evaluate the current and future outlook of the consumer in order to capture their views of the economy and financial situation.
Typically, questions cover such things as:
Current terms and conditions of business.Over the next 6-12 months business conditions.Current conditions of employment.Conditions of employment for the next 6-12 months.Over the next 6-12 months, total family income.
Participants are typically asked to reply to each question as "positive," "negative" or "neutral" and added up to the calculation of "relative value," respectively "1," "-1" or "0" This is then compared with the baseline "index value," frequently the initial value taken at the beginning of the survey—some decades ago. Finally, the indicator values are averaged to produce a commonly reported aggregate value.
The purpose of consumer confidence surveys is to predict future patterns of consumer spending with the premise that greater trust leads to greater purchasing and economic growth.
