sentiment is trending at any given time .
Through these series of questions , the Kasi Consumer Sentiment Index aims to add clarity and context to key insights from respondents : Their own financial situation ; Their job or employment prospects ; Their purchase intent ; The short-term general economy ; and The long-term general economy .
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Consumer sentiment - often used interchangeably with consumer confidence - assesses how consumers as a collective whole are feeling about the economy at a certain point and time , as well as their outlook for the future .
Obviously , when consumer sentiment measures are moving in a positive direction , it ’ s a clear indicator that the economy is doing well and most consumers anticipate that economic conditions will remain strong . Conversely , downward trends in consumer sentiment indicate that consumers are feeling uneasy about economic conditions and are pessimistic about those trends reversing any time soon .
These high-level sentiments play out in real life in terms of consumer activities and behavior . When people or business owners are optimistic about their own finances and prospects they tend to spend more freely , and are more open to purchasing nonessential items or making significant capital investments . Yet when things turn gloomy , many consumers and businesses tend to freeze up - out of necessity or fear - and spending declines .
Armed with the macro insights generated by these prominent indexes as well as industry-specific indexes and analysis , brands can then dig deeper into how their specific target audiences are feeling about their specific financial position , as well as their views of economic conditions at an industry and national level .
What consumer sentiment tells you
As suggested , consumer sentiment - often gauged using consumer surveys - is one of the most revealing economic indicators . Consumers are the basis of the developed economy and , in response , their attitudes and beliefs can tell you a lot about where they are at - and how your company might respond .
Consumer confidence
Consumer confidence is used to evaluate two - often strongly correlated - things : how consumers feel about the economy as a whole and how consumers feel about their personal economic situation . Consumer confidence is typically considered a lagging indicator because the real state of the economy will experience fundamental changes before individuals begin changing their actual spending and consuming behavior .
When consumers are not confident in the state of the economy , they will be much less likely to spend and consume . As the economy begins to expand , consumers typically will become more liberal with their spending , both because they likely have more money and because they are less worried about economic challenges . Interestingly , researchers have found that often consumers will tend to project their personal financial situation onto the broader economy as a whole .
Consumer spending
Any marketer or sales leader knows there are complexities involved in how , when and why people spend their money . Consumer spending is strongly tied to the overall economy as well as how individuals feel about that economy .
A consumer ’ s willingness to spend doesn ’ t simply rely on how much money they have in the bank or are currently earning , but also , how much money they believe they will likely have in the future . When consumers believe that their future financial situation will worsen - either due to personal issues or broader economic trends , they will be much less likely to make any serious financial commitments , even for things they could “ afford ” on paper .
Consumer sentiment and consumer spending often initiate a positive feedback cycle . In other words , as consumer sentiment begins to improve , consumer spending will usually increase in response . At the same time , widespread increases in consumer spending will typically indicate that the average person now is accessing a greater “ basket of goods ”, which , in turn , can cause consumers to have a more optimistic view of the broader economy .
Consumer attitudes
Consumer attitudes have a strong connection to general consumer sentiment .
A consumer ’ s attitude will intimately affect not only how much they are willing to spend ( consumer spending ), but it will also affect what they are willing to spend their money on . During the Covid-19 outbreak , for example , consumer spending generally dropped , but many products that are traditionally associated with negative consumer attitudes , such as alcohol , saw an uptick in sales .
While a shift in consumer attitudes doesn ’ t necessarily translate to a change in consumer behavior , examining attitudes can provide key insight . Knowing whether the consumer has an optimistic or pessimistic future can be very useful , but taking a closer look and diving deeper can help them learn even more .
For example , if a consumer has a pessimistic outlook for the next six months but believes things will improve within the next year - an outlook that is not uncommon in the middle of a pandemic - the consumer might still be willing to spend heavily on longterm investments , such as a mortgage for a home . If they believe that the economy is doing poorly and will continue to do poorly into the foreseeable future , on the other hand , they ’ ll be much less likely to make these long-term commitments .
Consumer sentiment , overall , is useful because very few consumers exist or make choices in a vacuum . Positive feedback cycles are ubiquitous in our economy , both for optimistic and pessimistic behaviors . When other consumers rush to invest in bitcoin , for example , others might feel they are missing out and decide to do the same . By understanding how a consumer ’ s worldview both shapes and is shaped by events - both real and imagined - in the consumer economy , it becomes possible to predict future behaviors and adjust your organization ’ s activity accordingly .
Yannick Lefang is the Founder of Kasi Insight , Africa ’ s leading decision intelligence company empowering business leaders and entrepreneurs to make crucial decisions with confidence . You can commune with him via email at : Info @ kasiinsight . com .