Dour, gloomy, sullen. You'll see similar words in newspaper headlines tomorrow describing today's release of the Consumer Confidence Index. The numbers fell sharply in December, which apparently surprised the experts.
What is the index all about? It's published by The Conference Board, a not-for-profit organization that conducts market-based research. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
The index fell from 84.9 in November to 80.3 this month, the sixth decline in the last seven months. The Conference Board's Lynn Franco says rising unemployment and a discouraging job outlook are the main factors affecting Americans these days: "Weak retail sales over the holidays clearly reflect the current mood of consumers."
Why should anyone care? It's an interesting measure for a lot of market watchers, because consumer spending accounts for roughly two-thirds of the nation's economic activity. If the average American decides to keep more money in her pocketbook, it's likely businesses will feel the pinch. Some of that may have already shown up in the form of disappointing holiday sales.
The falling index is certainly not a signal to go out and sell your stocks. No one can predict with certainty the future course of the economy, much less the market itself. After all, the index is a short-term indicator, and mostly a measure of retail activity. Investing, meanwhile, is a long-term endeavor.
