How to Trade the US CB Consumer Confidence
Table of Contents
Introduction
The Conference Board Consumer Confidence Index is one of the most closely watched measures of consumer sentiment in the United States. Released monthly, this indicator provides valuable insights into how American consumers feel about the economy and their willingness to spend money.
Consumer confidence is a leading indicator of consumer spending, which accounts for approximately 70% of US GDP. Understanding this report gives traders an edge in anticipating economic trends.
The CB Consumer Confidence Index differs from other sentiment measures like the University of Michigan Consumer Sentiment Index in its methodology and sample size, making it an important independent gauge of consumer attitudes.
- Release schedule: Last Tuesday of each month at 10:00 AM ET
- Survey size: Approximately 5,000 households
- Base year: 1985 = 100
- Source: The Conference Board
What It Measures
The Consumer Confidence Index measures consumer attitudes regarding current and expected economic conditions. It captures how consumers feel about the economy, job market, and their personal financial situations.
Key Components
- Present Situation Index: Measures current economic and employment conditions
- Expectations Index: Measures consumer outlook for the next six months
- Headline Index: Combined measure of present and future expectations
- Labor Market Differential: Jobs plentiful minus jobs hard to get
The Expectations Index is particularly important as it can signal turning points in consumer spending and the broader economy before they occur.
Important Thresholds
Understanding key levels helps interpret the data:
- Above 100: Consumers are generally optimistic about the economy
- Below 100: Consumers are pessimistic relative to 1985 baseline
- Significant deviation: Moves of 5+ points from expectations often move markets
- Trend direction: Rising trend suggests improving consumer spending ahead
Market Impact
Consumer confidence data affects currency markets through its implications for consumer spending and Federal Reserve policy.
Currency Reactions
- Strong reading (beat): USD positive - signals robust consumer spending ahead
- Weak reading (miss): USD negative - suggests potential spending pullback
- Fed implications: Strong confidence supports hawkish policy stance
As a tier-two indicator, CB Consumer Confidence typically moves markets 10-25 pips on significant surprises. Position sizing should reflect this lower volatility compared to tier-one events.
Cross-Market Effects
Monitor related market movements:
- Equities: Strong confidence often supports stock prices
- Treasury yields: May rise on strong readings
- Consumer discretionary stocks: Directly correlated with confidence
Trading Strategies
Several approaches work well for trading the Consumer Confidence release.
Strategy 1: Deviation Trading
- Know the consensus: Check forecasts from the economic calendar
- Measure surprise: Focus on deviations of 5+ points from consensus
- Quick execution: Enter within first minute on clear surprises
- Moderate targets: Aim for 15-25 pips given tier-two status
Strategy 2: Component Analysis
Analyze both components for better trade decisions:
- Both rising: Strong bullish signal for USD
- Both falling: Strong bearish signal for USD
- Mixed signals: Reduce position size or skip trade
- Expectations diverging: May signal turning point ahead
CB Consumer Confidence is released at 10:00 AM ET, two hours after major data like Retail Sales or CPI. Be aware of how earlier releases may have positioned the market.
Risk Management
- Position size: Use 50-75% of tier-one event size
- Stop placement: 15-20 pips typically appropriate
- Context matters: Impact is higher during Fed focus on consumer data
- Avoid crowded days: Skip if released alongside tier-one events
