Everyone has stood in a mall at one time or another, watching the crowds of people, or sat in front of their TV looking at long lines of traffic, enduring the daily commute. Crowds of people are crowds of consumers. They are the anonymous masses who make the world go around, and what they think and feel matters a whole lot to the business world. Thus we have surveys and polls and tracking procedures to help business react to the moods and cater to the wants and needs of these most important people.
The Consumer Sentiment Index is one such survey. It was created by George Katona at the University of Michigan in the late 1940′s and is still being produced after all those years. The index consists of 50 core questions, asked of 500 U.S. consumers, by telephone, once a month. The surveys longivity would certainly attest to the value derived from these conversations.
The telephone Q&A is designed to reveal consumer attitudes on personal finances, personal spending habits, opinions on the current economic climate and an overall general consensus on what the average person is thinking and doing in the particular period of time. This data is tabulated and used by business to determine future marketing and manufacturing initiatives. Using the standardized value of 100, the current sentiment fell from 73.5 in September to 69.4 in early October, which was a larger decrease than was anticipated. The September reading was the highest since January 2008, up a full 8 points.
Obviously if consumer sentiment is buoyant, business and investment optimism could rise and take the price of markets with them. The opposite can also be true if sentiment is negative. The release of this report warrants caution by traders.
