What group can claim credit for being the driving force behind the world’s largest economy? Hint: You are probably a member of this group.

The answer is U.S. consumers, whose spending is responsible for more than 70% of U.S. gross domestic product (GDP). As we’ve seen in recent years, when consumer conditions are bad, the effects can be widespread. If consumer spending falters, it affects business income and tax revenues. If revenues fall far enough, the effects can include increased unemployment, which in turn exaggerates the problem because the unemployed have reduced incomes and tend to make fewer purchases.

Economists, traders, investors, and policymakers all take great interest in the financial health of consumers and what they may do next. Here are some popular indicators of consumer behavior.

The Monthly Retail Trade Survey is conducted by the U.S. Census Bureau, which mails questionnaires to about 12,500 businesses. The Census Bureau uses the data to estimate the dollar value of total national retail sales, the value of month-end retail inventories, and the ratio of retail inventories to sales.

The Monthly Retail Trade Survey results are used by the Bureau of Economic Analysis to help calculate GDP and by the Bureau of Labor Statistics to calculate the consumer price index and productivity measurements. The White House uses them to analyze current economic activity. The Federal Reserve uses them to detect trends in consumer behavior. And the private sector uses them to measure economic trends.

The Bureau of Labor Statistics Consumer Expenditure Survey comprises two separate surveys that collect information from about 7,000 households. The weekly Diary Survey asks participants to document their expenditures for food and beverages, nonprescription drugs, tobacco, and other personal care products. The quarterly Interview Survey asks about larger monthly expenditures such as housing, clothing, transportation, entertainment, and health care.

The Consumer Expenditure Survey is noteworthy for the ways in which it links the data collected with the respondents’ household characteristics. Characteristics measured include the amount and number of incomes in the household; how long they have lived in their homes; as well as their age, gender, education, race, and other details that might illuminate consumer behavior.

Perhaps the best-known consumer survey is the Consumer Confidence Index, which measures consumer attitudes rather than behavior. Each month, The Conference Board polls 5,000 households about their assessment of business conditions and the outlook for their regions. The rub is that the CCI does not appear to predict consumer behavior. Consumer spending has increased every year, regardless of the direction of consumer confidence. Dips may occur from one month to the next, but spending has increased on an annual basis as far back as available records go.

Consumer behavior can be a good source of clues about the direction of the economy and the financial markets. Keeping a close eye may help with decisions about your portfolio.

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