What does consumer confidence measure?

Consumer confidence measures the level of optimism consumers feel about the economy. This metric is important because it reflects how consumers view their current financial situation and their expectations for the future. A high level of consumer confidence typically indicates that individuals feel secure in their job prospects and financial stability, which often leads to increased consumer spending. Conversely, a low consumer confidence level may suggest that people are less willing to spend, fearing economic downturns or uncertainty.

This measure plays a crucial role in economic forecasting, as consumer spending is a significant driver of economic growth. When consumers are confident, they are more likely to make purchases, invest in goods and services, and contribute to overall economic activity. Hence, tracking changes in consumer confidence helps economists and policymakers understand potential shifts in the economy and adjust their strategies accordingly.