Why Investors Care
The pattern in consumer attitudes can be a key influence on stock and bond markets. Consumer spending drives two-thirds of the economy and if the consumer is not confident, the consumer will not be willing to spend. Confidence impacts consumer spending which affects economic growth. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. Since consumer spending accounts for such a large portion of the economy, the markets are always eager to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. It is easy to see how this index of consumer attitudes gives insight to the direction of the economy. The Bloomberg Consumer Comfort Index is produced by Langer Research Associates of New York. Each release includes results among 1,000 randomly selected adults, with breakdowns available by age, race, sex, education, political affiliation and other groups. The Index has significant long-term correlations, including on a time-lagged basis, with a variety of key economic indicators. The index, produced by Langer Research Associates in New York, is derived from telephone interviews with a random sample of about 250 consumers a week aged 18 or over, and is based on a four-week moving average of 1,000 responses. The percentage of households with negative views on the economy, personal finances and buying climate is subtracted from the share with positive outlooks and the difference is divided by 3. The results can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative.