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What is Consumer Confidence?

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  • Written By: Felicia Dye
  • Edited By: Melissa Wiley
  • Last Modified Date: 19 August 2016
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Consumer confidence refers to the assessment of consumers' attitudes. When individuals are optimistic about the economy and have positive attitudes about their individual financial conditions, consumer confidence is considered to be strong or high. This is usually evidenced by a significant amount of spending. On the contrary, when individuals have negative perceptions about these issues, the lack of confidence is generally portrayed through a decrease in spending. At either extreme, the attitude of consumers is widely used as a basis for making economic decisions.

Consumer confidence is a measure of the public's feelings about the financial environment. When people have money or access to credit and jobs are plentiful and well paying, people are likely to make a higher volume of purchases than they would if the financial environment is bleak. Consumers are an important factor in a healthy economy. This makes their attitudes very important.

Consumer confidence is so important that it is commonly used as an economic indicator. An economic indicator is information that is used to assess the condition of an economy and to make decisions for the future. This information is often converted into statistics, charts, and graphs and is then used by a wide range of individuals.

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Consumer confidence helps manufacturers decide how many items to make. It helps stores determine how much inventory they need. It even helps governments to determine whether they should alter interest rates or implement job growth programs. To make these decisions, these parties often rely partly on historical consumer data for improved accuracy.

Reviewing consumer behavior over a span of time is important for many people. When parties use this information to make decisions, they are essentially making guesses. Historical information is used to reveal behavioral patterns and to provide a sounder basis for decision making.

Although it is true that the state of one economy can have global effects, it is not necessarily true that the attitudes of consumers in one place mirror those of consumers in another place. The manner in which this information is measured in one place may also differ from the manner in which it is measured in another. Despite these differences, it may be possible, however, to make a global assessment based on consumer behaviors. Another thing to realize is that consumer confidence is a single economic indicator. Even though this information may be highly valued, it is generally used in conjunction with other statistics before decisions are made.

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