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All about Consumer Confidence Index

Published on Fri, Feb 20, 2009 at 19:37 | Source : CNBC-TV18

Updated at Wed, Feb 25, 2009 at 17:53

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CNBC-TV18's Boston Analytics Consumer Confidence Index is tailored to India and the Indian consumers. It is used to capture consumer's confidence on a large number of variables/economic indicators, e.g. inflation, employment, real estate, consumer spending, savings and others. Here's a quick review of how is the index constructed, what is unique about it, how important it is to track consumer sentiment and its reliability.

Also read:

World's largest Consumer Confidence Index launched

What does the Consumer Confidence Index do?

What's unique about the CNBC-TV18 Boston Analytics Consumer Confidence Index?

Tailored to India and the Indian consumers (e.g. emphasis on savings, festivity seasons - "unique" features of India culture).

More questions -25 vs 5-10 than in most other surveys. This enables us to capture consumer's confidence on a large number of variables/economic indicators, e.g. inflation, employment, real estate, consumer spending, savings and others.

Unique sampling plan to capture the heterogeneity of the Indian population: Achieved through rich demographical inclusion and again with large sample size.

Weighting scheme: Recognizing that each question impacts consumer spending with varying intensity (We have carried out empirical testing procedures to establish appropriate weighting. Therefore, our survey has a wide scope and also richly nuanced).

How is the index constructed? The overall index has a current situation and futures expectations index. Tell us about it.

In order to assess consumer sentiment and evaluate how it changes over time, we need to translate this subjective measure into a numeric index that can be consistently calculated and compared over time; this is how we do it:

The Index is based on 25 questions about different aspects of the consumer's perception of the observed and expected state of the economy and his/her own household financial conditions

Each of the questions has 5 options ranging from highly positive to highly negative, and each option is assigned a different weight which ensures that we weed out any sampling bias (to make it as representative of the overall population as possible)

Scores for each question are computed as the number of positive responses divided by all positive and negative responses. This reflects the degree of confidence of the consumer regarding a particular question

These scores are then multiplied by a question specific weight

Finally, sum of all these scores is compared to the sum of the scores obtained in the base period (Jan 08) and will give the Composite Index value

We are also creating sub indices that follow similar methodology.

Page 2: How important it is to track consumer sentiment?

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