CNBC-e regularly announces four indexes that are to help fulfill lack of economic data for the Turkish economy. These four indexes aim to measure the level of consumer confidence and the level of actual consumption. The indexes which concentrate on measuring the consumer confidence are the Consumer Confidence Index (CCI), Consumer’s Expectations Index (CEI), Propensity to Consume Index (PCI), and the index which focuses on measuring the level of actual consumption is the Consumption Index (CI). It is well known that these indexes provide essential data to the professionals, producers, economists and the general public.
Consumer Confidence Index
Expectations have been at the heart of the macroeconomic analysis for sometime. Consumers form expectations depending on endogenous and exogenous factors in the economy. These expectations have important effects on economic variables like interest rates, exchange rates, inflation and growth. Therefore, it is obvious that following the trends in consumer expectations will improve the forecasts of economic variables. In this sense, a lot of countries like USA, Britain, and Germany calculate consumer confidence indexes to monitor the developments in consumer expectations. In Turkey, CNBC-e is the first and only private institution to measure the consumer confidence index nationally.
Methodology
The CNBC-e consumer confidence index shows the consumer sentiment based on a monthly telephone survey of households. This survey has been conducted on a real-time basis but has been announced on a monthly basis since January 2002. The methodology used to compile and to calculate the index has been adopted from the Michigan University index of consumer sentiment.
The index is composed of the five questions below:
1) We would like to learn your current economic situation. Can you compare your (and your family’s) current financial situation with last year?
Better Worse Same No Idea
2) What do you think your (and your family’s) future financial situation will be in a year?
Better Worse Same No Idea
3) Can you compare your current expectations about Turkish economy with the previous month?
Better Worse Same No Idea
4) What do you think Turkish economy’s situation will be in a year?
Better Worse Same No Idea
5) Do you think that the current period is a good time to buy durable consumer goods such as TV, refrigerator and furniture or vehicles or residence?
Good Time Bad Time Same
The first two questions assess the respondent’s personal condition and expectations. The following two questions evaluate the expectations with regard to the Turkish economy. The fifth question measures current consumption tendency of consumers.
The index is compiled of 704 completed surveys. The survey data for the next month is obtained from the respondents between the 27th day of the current month and the 26th day of the next month. The distribution of the completed surveys meets seven criteria:
1) 70 percent is selected from Istanbul, Ankara and Izmir, 30 percent selected from other cities and big districts in Turkey.
2) 60 percent is selected from 36-55 age group, 40 percent is selected from 18-35 age group.
3) 50 percent is male and the other half is female.
4) 50 percent of the total surveys are composed of new records.
5) A minimum of 20 percent of new records belongs to individuals who had been successfully surveyed in the previous month.
6) A maximum 30 percent of 704 completed surveys may be composed of additional respondents and these respondents are not called again in the next month.
7) Seventh and one of the most important criteria is that respondents are not surveyed more than two times. This helps to minimize the biases in the answers of respondents.
Index Calculation
The index is calculated according to following formula:
Index Value = (Current period value / Base period value) *100
Current period’s value for each question is being calculated as =
((Number of optimistic answers for the question – Number of pessimistic answers for the question) / 704)*100) + 100
The current period values of each question are summed up to obtain current period’s value for the overall index. The current period’s value calculated for January 2002 is fixed as the base period value. The base period of the index is set as January 2002 and the value of the index at this period is 100. The index has a point of scale ranging from 0 to 200.
The CNBC-e consumer confidence index calculated with the above methodology is announced at 09:00 on the first day of every month-or the next business day if it falls on a weekend or holiday-on CNBC-e television channel after independent auditor (Ernst & Young) has checked and validated the index. According to our knowledge, this index is likely to be the only consumer confidence index in the world, which is checked and validated by an independent auditor.
There are two sub-indexes of CCI. These indexes are Consumer’s Expectations Index and Propensity to Consume Index.
Consumer’s Expectations Index
The Consumer’s Expectations Index is calculated from the consumer confidence survey question 2 and question 4. These questions are
Question 2) What do you think your (and your family’s) future financial situation will be in a year?
Better Worse Same No Idea
Question 4) What do you think Turkish economy’s situation will be in a year?
Better Worse Same No Idea
The methodology to calculate the CEI index is exactly the same as the CCI index. Hence, the index is calculated according to following formula:
Index Value = (Current period value / Base period value) *100
Current period’s value for each question is being calculated as =
((Number of optimistic answers for the question – Number of pessimistic answers for the question) / 704)*100) + 100
The current period values of each question are summed up to obtain current period’s value for the overall index. The current period’s value calculated for January 2002 is fixed as the base period value. CEI aims to measure only the future expectations of consumers both for their own financial situation and the Turkish economy in a year’s time.
The CNBC-e CEI calculated with the above methodology is announced at 09:00 on the first day of every month-or the next business day if it falls on a weekend or holiday-on CNBC-e television channel after independent auditor (Ernst & Young) has checked and validated the index.
Propensity to Consume Index
Propensity to Consume Index is calculated using only the fifth question of the consumer survey with the same methodology of the above described two indexes. Therefore, the question used to calculate PCI is
Question 5) Do you think that the current period is a good time to buy durable consumer goods such as TV, refrigerator and furniture or vehicles or residence?
Good Time Bad Time Same
The methodology to calculate the PCI index is exactly the same as the CCI index. Hence, the index is calculated according to following formula:
Index Value = (Current period value / Base period value) *100
Current period’s value for the question is being calculated as =
((Number of optimistic answers for the question – Number of pessimistic answers for the question) / 704)*100) + 100
The current period values of the question are summed up to obtain current period’s value for the overall index. The current period’s value calculated for January 2002 is fixed as the base period value. PCI is supposed to measure the current tendency of the consumer to purchase durable goods.
The CNBC-e PCI calculated with the above methodology is announced at 09:00 on the first day of every month-or the next business day if it falls on a weekend or holiday-on CNBC-e television channel after independent auditor (Ernst & Young) has checked and validated the index.
CEI and PCI help to better identify the sources of movement in CCI. A preliminary index for every month is announced at 09:00 on 14th of each month.
Consumption Index
One of the major determinants of gross fixed capital formation, production and employment in an economy is private consumption demand. Thus, information on the general pattern of consumption is essential while forecasting the long term economic outlook. The State Institute of Statistics in Turkey announces quarterly data for private final consumption expenditures within the Gross National Product figures. However, due to its nature, this data hardly helps to analyze the dynamic nature of the consumption demand. To fill that need, CNBC-e Consumption Index aims at measuring the actual consumption pattern by gathering personal consumption expenditure data that belongs to the previous month. In this sense, CI assesses whether any significant changes have occurred in the general pattern of private final consumption expenditures.
Methodology
First, sales per customer data from companies that have extensive chain stores in Turkey are collected. The major sectors used are
Food Sector
Clothing Sector
Home Goods Sector
Health Sector
Culture and Entertainment Sector
Hotel, Restaurant, and Tourism Sector
Other Services Sector
Real Estate Sector
Automotive Sector
Index Calculation
The data for these sectors (except the real estate and automotive sectors) are deflated by the corresponding consumer price inflation data announced by the SIS for each sector. This will result in the current period value of each sector. The index value of each sector is calculated as
Index Value of Each Sector = (Current period value of the sector / Base period value of the sector) *100
Then, index value of each sector is weighed according to weights obtained from the consumer price index of SIS. The sum of the weighted index value of each sector gives the ICI. The current period’s value calculated for January 2005 is fixed as the base period value and equals 100.
The CNBC-e CI calculated with the above methodology is announced at 09:00 on the 10th day of every month-or the next business day if it falls on a weekend or holiday-on CNBC-e television.
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