A Consumer Expectation Index is used to gauge emotions of the consumer over the future economic conditions as they foresee it over the next six months. This index helps deduce over sixty percent of the Consumer Confidence Index, which is again another commonly known indicator of the economy. The data gathered for this index comes from a survey of five thousand homes.
The data comprises of results derived from questions that include their expectation over the industrial and employment situation in the country and what do they feel about the income and jobs in the market; whether it will shoot up or decline or will not change at all.
This index is useful for businesses as this provides them with the present situation of the market, where to invest (Backhouse, Dudley-Evans, & Henderson, 1993). This helps them formulate their future business strategies effectively. A small example of the usefulness of this index is that a company decides to hire more people but if the conditions of the future economy for six months approximately are adverse, the investment decisions for other projects will be delayed for the time being. This helps save the business heavy losses they could incur by making this decision.
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