The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. Note, changes in consumer confidence and retail sales do not move in tandem month by month. Conversely, if inflation begins to accelerate, spending plans may increase for the short-term as consumers buy now to avoid having to pay higher prices later. Regional differences in consumer confidence are an indication of differing business cycles across the nation. This has implications for spending on durable goods and, more importantly, for residential real estate markets.
Financial markets interpret rising consumer confidence as a precursor to higher consumer spending.
Higher consumer spending could in turn spark inflation. Look for a change in the direction of the index's six month moving average. Consumers do not usually have the necessary information to accurately assess income and job growth six months hence. Release provides information on planned spending, which does not necessarily turn into actual spending, although it is unlikely that increasing consumer confidence would be followed by a decline in spending. The Consumer Confidence survey is not useful for any type of forecasting.