Consumer spending is key to the economy

Consumer spending is the key to any market economy. On the airwaves, there's never a shortage of data, analysis, and cable commentary regarding consumer behavior. So what are the  in a good economy? How about in a bad economy? There is no doubt that consumer spending is the most vital component of any economy. Why? Depending on the economy's sheer breadth, consumer spending can range anywhere from 50% to 75% of  (GDP).

In the U.S. this percentage is about 65% of total GDP.1 The first part of measuring total consumption is measuring consumer sentiment, which is derived completely from a consumer's standpoint. This article will recap the vital economic indicators of overall consumption, outlining what trends to look for and when to look for them.

KEY TAKEAWAYS

Measuring consumer sentiment is the first step in measuring total consumption.

The Consumer Confidence Index (CCI) and the Consumer Sentiment Index are indices used to measure consumer sentiment.

Business capital spending is also a consumption indicator—where corporate spending could be a sign of economic growth, and cutbacks can be a sign of an economic downturn.

Measuring the consumption of durable goods—such as appliances, furniture, and electronics—and automobiles also serves as an indicator of consumer spending.

Corporations that predict a depressed economy may reduce spending on auxiliary services, such as advertising and marketing.