Figure 9-3: Consumer sentiment surveys: Coincident, not leading, indicators
The Consumer Confidence Index (compiled by The Conference Board) and the University of Michigan’s Consumer Sentiment Index are based largely on questions asked of consumers regarding their expectations of future economic conditions. The indices are, however, largely coincident in their relationship to Y/Y consumer spending. This is because consumers’ attitudes toward the future, manifested in answers given today to questions asked today, reflect today’s economic inputs and sentiments. Neither index, therefore, has proved to have significant predictive value.
Current Comment: As usual, neither of these indices provided any significant lead indication of the consumer-spending downturn in 2008 nor the recovery experienced since early 2009. However, both indices’ sharp declines in recent months, somewhat greater than the moderate slowing of consumer spending, can only be viewed as a pessimistic sign.
Sources: Consumer Confidence Index: Conference Board
Consumer Sentiment Index: 11/01/1952-11/01/1977: St. Louis Fed Consumer Sentiment Index: 01/01/1978-present: St. Louis Fed