By iQoncept | Adobe Stock
One time, many years ago when I worked in the swimming pool industry, I was chatting with a highly successful components manufacturer. We were talking about the various metrics that we watched to gain insights into the health of the pool market. I brought up unemployment figures, interest rates and the stock market as examples.
“There is only one number I watch,” he said. “I have found, again and again, that it’s the best indicator of where we are heading in the near future.”
The number on his mind? The Consumer Confidence Index (CCI). In case you’re like most people and are only vaguely aware that such a number exists, I’ll tell you how it works. The CCI is actually quite interesting.
There are a number of indicators out there that look at consumer confidence, and they all use different methodologies. The most well-known one comes from a nonprofit called the Conference Board.
History of the Consumer Confidence Index
First introduced in the 60s, the CCI is an index that indicates how much optimism American consumers are feeling about the general economy as well as their own specific financial circumstances for the next six months. The CCI is obtained using a questionnaire that goes out every month to 5,000 people all over the country. The answers are tabulated, and the final number is then compared to the same month in 1985. Results are published on the last Tuesday of every month.
You might be thinking, “Wait a minute, we’re comparing today’s number to 1985? Why?”
My friend noticed that the number was a predictor of the short term market.
Let me explain. So in October of 2020, the index measured 100.9. Using October, 1985 as a benchmark—meaning that number is considered 100—we can see that people in October of 2020 were just slightly more optimistic than they were 35 years ago. The folks at the Conference Board chose 1985 as the benchmark year because they felt it represented a middle ground economically, being neither a boom nor a bust in the business cycle.
How the CCI Relates to the Remodeling Industry
Consumer confidence is extremely important when it comes to remodeling. A homeowner who believes that their job is safe and that their family’s income will increase in the next six months is a lot more likely to invest in a new kitchen than one who feels more unsure.
This is why my friend who sold swimming pool parts set so much store by it—he noticed that the number was generally spot-on in predicting what his market would do over the short term.
In February, 2020, just before COVID struck, the CCI was at 130.7. It dropped like a rock through the next few months, and started to climb again as “the new normal” became... well... just normal.
All this is to say that while it’s not the only number to watch, anyone in the businesses of selling high-priced, discretionary products and services would be wise to check it out every month.