The US Conference Board Consumer Confidence index measures how consumers feel about jobs, the economy, and spending. In the US, consumer spending accounts for 50-70% of total GDP, making the consumer a hugely important driver of the economy. However, consumer confidence does not equal consumer spending, and it’s the latter that really matters. Since the consumer confidence index places a relatively high emphasis on employment as opposed to income, it can actually be a lagging rather than leading indicator for financial markets.
While consumer confidence and consumer spending have been shown to be quite uncorrelated in the immediate short term, over slightly longer periods it is fair to say that higher consumer confidence (especially relative to expectations) tends to be good for stocks, good for the dollar and bad for bonds, all else equal.
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