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Part III. Fundamental analysis / Chapter 15. Indicators of household income and consumer sentiment
The indicators of income of the population include:
- Personal Income;
- Personal Spending;
- Consumer Credit;
Personal Income: Data on personal income is collected from all sources, including wages, dividends from securities and deposits, rental income, government subsidies, and more. The indicator reflects potential consumer demand, as increasing income leads to higher purchasing power for individuals. The trend of rising personal income is favorable for strengthening the currency exchange rate, but in practice, it is often used in conjunction with the Personal Spending indicator. Data on personal income for the previous two months is published monthly, after the 20th of the month at 16:30 Moscow time.
Personal Spending: Consumer spending is considered based on three components: expenditures on services, expenditures on durable goods, and expenditures on non-durable goods. The dynamics of service consumption are generally consistent, making future values relatively easy to forecast. The Retail Sales indicator essentially reflects the same data as expenditures on durable and non-durable goods, so only sharp changes in the dynamics of the indicator are taken into account when analyzing the markets. Higher consumer spending is associated with better economic growth and an increase in the value of the national currency. Reports on personal spending are published in the last week of the month at 16:30 Moscow time, along with the Personal Income indicator.
Consumer Credit: The Consumer Credit index reflects consumers' indebtedness for the purchase of goods and services on credit, installment plans, and credit card debt. This indicator does not have a significant impact on the market, as its values and dynamics can vary widely, leading to frequent revisions of the reports. In market analysis, greater attention is given to indicators such as car sales, retail sales, personal consumption, and consumer confidence, which characterize consumer spending and are released earlier than consumer credit reports. Therefore, the credit indicator has little influence on the markets.
As a measure of consumer spending, the indicator of consumer credit has limited significance since it is published later than personal spending reports, and the share of goods and services purchased on credit is of little interest to investors. At the same time, there is no strong correlation between these two indicators - the growth of personal expenditures may have a weak influence on changes in consumer credit. An increase in the number of goods sold on credit is accompanied by the development and growth of the country's economic situation and the national currency exchange rate. Data on consumer credit is published on the fifth business day of each month at 23:00 Moscow time.
Two indicators fall under consumer sentiment indexes:
- Consumer Sentiment Index, CSI;
- Consumer Confidence Index, CCI.
Consumer Sentiment Index (CSI): Consumer sentiment can have a significant impact on a country's economy, as uncertainty about the future tends to lead the population towards saving and reducing expenditures, which, in turn, affects overall demand and the economy as a whole. The Consumer Sentiment Index, developed by the University of Michigan to assess consumer sentiments, can significantly influence market reactions. Data is collected through telephone surveys based on five questions: two questions related to consumers' personal financial situation and three questions about the future state of the economy. The index is calculated based on the responses of 500 individuals. The first two questions provide an assessment of people's perception of the current economic conditions, while the last three questions serve as indicators of consumer expectations. The index value is derived by subtracting the percentage of individuals with optimistic views from the percentage of those indicating a deteriorating economy and then adding 100 to the result.
The growth dynamics of the indicators are usually associated with GDP growth, improved economic activity, and higher interest rates. Similarly, the Consumer Sentiment Index (CSI) also influences the stock market - as the index increases, stock prices tend to rise, except in cases where there is a high threat of inflation or the unemployment rate approaches zero.
Preliminary data on the Consumer Sentiment Index is published on the second Friday of the month at 18:00 Moscow time, while the final values are released on the last Friday of the reporting month. The data is published monthly.
Consumer Confidence Index (CCI) is also based on surveys conducted among the population, similar to CSI. To compile the reports, 5,000 households are surveyed on topics such as business development conditions, labor market conditions, earnings prospects, and more. Unlike CSI, the Consumer Confidence Index has a baseline of 100 units, which represents the data for the year 1985.
Предварительные данные по индексу ожидания потребителей публикуются вторую пятницу месяца в 18:00 московского времени, а окончательные значения индикатора выходят в последнюю пятницу отчетного месяца. Данные публикуются ежемесячно.
Minor changes in the index do not cause significant market fluctuations, but jumps of 5 or more units are taken into consideration. Rising trends in CCI have a positive impact on strengthening the currency exchange rate and the country's economic development. The indicator is often used to forecast the dynamics of the overall economic situation and labor market conditions. The index consists of two assessments:
- Assessment of the current economic situation (40% of the index)
- Assessment of future economic changes (60% of the index)
The data is published on the last Tuesday of each month at 18:00 Moscow time.