Question

B. Explain why the results of Consumer Confidence and Consumer Expectations surveys are leading indicators.

Answer 1

Answer: Results of consumer confidence and consumer expectations surveys are leading indicators because in these survey consumers are about to tell their near future marginal willingness to pay for goods and services. They are likely to open their near future plan and their expectations from the market. So indirectly they send their signal to the investors and market about the future expansion and contraction in demand. When consumer confidence falls, the business community got nervous and they are unlikely to invest more in the market. But when consumers report feeling good and optimistic about their individual and the nation's economic well-being, sales are expected to rise as a result investors are likely to enhance production, stimulating employment and economic growth. Hence these are the leading indicators.