Why in the news?
Recently, Reserve Bank of India (RBI) released the results of January 2023 round of its bi-monthly Consumer Confidence Survey (CCS).
About Consumer Confidence and Consumer Confidence Survey (CCS)
- It is an economic indicator that measures the degree of optimism or pessimism that consumers feel about overall state of the economy and personal financial situation.
- It serves as an indicator of the health of the economy from the perspective of the consumer.
- High consumer confidence in the economy is usually related to higher spending by Consumers.
- It is measured through a bi-monthly Consumer Confidence Survey (CCS) conducted by the Reserve Bank of India (RBI).
- Survey obtains current perceptions (vis-à-vis a year ago) and one year ahead expectations on general economic situation and own income and spending across 19 major cities.
- Survey obtains information on urban consumer sentiments and captures qualitative responses to questions pertaining to general economic conditions.
- CCS responses are measured through two indexes:
- Current Situation Index (CSI) - Consumer sentiment about current economic, employment, and price conditions as compared to a year ago.
- Future Expectation Index (FEI) - Expectations about economic, employment, and price conditions a year ahead.
- Businesses often use it to make better-informed decisions or adjustments in strategy such as investments in new projects or launch of new products.
Findings of the latest Consumer Confidence survey
- Consumer confidence improved both for the current period as well as for the year ahead.
- Current situation index (CSI) continued on its recovery path since the historic low recorded in mid-2021.
- It increased on the back of improved sentiments on general economic situation and household income.
- Future expectations index (FEI): Rose to its two-year high on the back of improved optimism on general economic situation, employment and income over the next one year.
Conclusion
Consumer confidence does give a meaningful clue as to the economy's strength, both in the present and the future. There is a need for further consideration for joining it with other forecasting information for better future economic predictions.