Consumer demand is a crucially important component of the U.S. economy. Consumer spending constitutes about 68% of GDP. Consequently, consumer confidence is an important leading indicator because it tells us about likely consumption and saving patterns in the near future.
The above chart displays the The OECD’s Consumer Confidence Index (CCI) for the United States from January 1, 1980 onward. The gray bars represent recessionary periods as determined retrospectively by the NBER.
The OECD CCI is based on a representative survey that asks consumers about their finances, employment, household savings and their feelings about the economy. Levels below 100 on the index suggest a negative outlook and a tendency to save rather than spend.
Other important indexes of U.S. consumer sentiment include the University of Michigan’s Index of Consumer Sentiment and the Conference Board’s consumer Confidence Index.