Sentiment and consumer confidence play an important role in moving the capital markets. Sentiment is usually a function of the direction of a market along with the confidence of consumers and producers within various nations. Although situations do exist where sentiment by market participants is positive but confidence by consumers and producers is negative, these measurements generally move in tandem and over the course of time will correlate highly with one another.
Producer and consumer confidence are the most common ways to measure economic sentiment. Producer sentiment is another way of say business confidence, as it measures how business feel they will perform in the current environment as well as in the future.
For example, in the United States many cities and states, as well as the nation report producer sentiment in the form of purchasing manager’s indices. New York, Philadelphia, along with Chicago are some of the cities that report on the state of manufactures. At the end of each month, both the Institute of Supply Management and Markit release reports that show indices that measure items such as new orders, employment, prices, and the state of the overall business. These sentiment surveys are absorbed by market participants and help determine the state of the economy as reflected by the producer.
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