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Consumer Confidence Index

Consumer Confidence Index. What is it?. Measures consumers sentiment about their personal financial situation and that of the country as a whole. Own financial situation (present and future) Employment Spending intentions Assessment of the general economic conditions. The Rationale.

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Consumer Confidence Index

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  1. Consumer Confidence Index

  2. What is it? • Measures consumers sentiment about their personal financial situation and that of the country as a whole. • Own financial situation (present and future) • Employment • Spending intentions • Assessment of the general economic conditions

  3. The Rationale • Personal consumption expenditure - driver of GDP growth • Spending is a function of: • Current and expected income • Current and expected prices • The CCI seeks to forecast consumer spending through a survey of consumer sentiment

  4. Features of the CCI • The CCI may be related to macroeconomic variables such as inflation • Ex: Confidence is boosted by lower inflation, lower interest rates and higher real income (the reverse may also be true) • Enterprises can make use of consumer confidence index

  5. OECD Area

  6. Consumer Confidence Index Real GDP growth

  7. Consumer Confidence Measure Indicator • Frequency: monthly • Published at: ISET-PI web site (http://www.iset-pi.ge/) • Start date: May 2012

  8. Consumer Confidence Measure Indicator • 300-350 interviewed respondents per month • Compared with: • U.S. - 5,000 respondents • Czech Republic - 1,000 respondents  • Germany – 2,000 respondents • Randomly generated mobile phone numbers • Same person can not be interviewed twice during the year. • Response rate: 80%

  9. Measuring the Index • 15 questions about: • Current financial standing of household , past and next 12 months • General economic situation, past and next 12 months • Consumer prices, past and next 12 months • Employment conditions for the next 12 months • Current saving environment, general • Saving intentions, next 12 months • Likelihood of purchasing a car, next 12 months • Likelihood of purchasing a house, next 12 months • Likelihood of making home improvements, next 12 months

  10. Compiling the Index • The consumer confidence indicator is the arithmetic average of the balances (in percentage points) of the answers to those 15 questions. • How balances are calculated? • Q8: In view of the general economic situation, do you think that now it is the right moment for people to make major purchases such as furniture, electrical/electronic devices, etc.? • Balance=25%-35%=-10% (ignore 40% of neutral responses)

  11. Compiling the Index • In case of questions with five or six options Q14: Are you planning to buy or build a home over the next 12 months? • Balance = (PP + 0.5P) − • (NN + 0.5N) • Balance=(10%+0.5*15%) − (35%+0.5*30%) =-32.5%

  12. Compiling the Index • Q2: How do you expect the financial position of your household to change over the next 12 months? It will... • Balance=(15%+0.5*12%)- • (7%+0.5*35%) • =3.5% • Note: Ignore neutral and don’t know answers

  13. Compiling the Index • We calculate following indices: • Overall CCI index • Present situation index • Expectations index

  14. Consumer Confidence Index results

  15. Consumer Confidence Index results

  16. Consumer Confidence Index results

  17. Our future objectives • Implement the EU harmonized survey programme of Business and Consumer Surveys • Industrial confidence indicator • Services confidence indicator • Retail trade confidence indicator • Construction confidence indicator • Economic Sentiment Indicator • Industry - 40%, Services - 30%, Consumers - 20%, Construction - 5%, Retail trade - 5%

  18. Thank You For Attention

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