Consumer Confidence vs Sentiment: Which Index to Use?

Two Surveys, Different Insights

There are two major consumer sentiment surveys in the US. Both matter, but they measure different things.

Conference Board Consumer Confidence

The Basics

• Publisher: Conference Board (private nonprofit)
• Sample: 5,000 households monthly
• Base: 1985 = 100
• FRED Series: CSCICP03USM665S
• IQ Score: 93

What It Measures

• Current conditions (40% weight): Jobs, business conditions today
• Expectations (60% weight): Jobs, income, business 6 months ahead

Key Characteristics

• Job market focused: Heavily influenced by employment conditions
• More volatile: Responds quickly to news events
• Better for short-term: More predictive of near-term spending

University of Michigan Consumer Sentiment

The Basics

• Publisher: University of Michigan Survey Research Center
• Sample: 500+ households monthly
• Base: 1966 = 100
• FRED Series: UMCSENT
• IQ Score: 94

What It Measures

• Current conditions (50%): Personal finances, buying conditions
• Expectations (50%): Business conditions, buying conditions 1-5 years

Key Characteristics

• Inflation expectations: Includes influential inflation forecasts
• Less volatile: Smoother series
• Fed watches this: Especially the inflation expectations component

Direct Comparison

Inflation Expectations (Michigan)

The Fed closely monitors Michigan 1-year and 5-year inflation expectations:

1-Year Expectations

FRED Series: MICH

• More volatile
• Responds to gas prices
• Range: typically 2-5%

5-10 Year Expectations

FRED Series: MICH5Y

• More stable (anchored expectations)
• Fed worries if this unanchors
• Range: typically 2.5-3.5%

Other Sentiment Measures

Bloomberg Consumer Comfort Index

Weekly survey of 1,000 adults

• Buying climate
• Personal finances
• Economic expectations

NFIB Small Business Optimism

Not consumer, but valuable:

• FRED Series: NFIB
• Hiring and capex intentions
• Economic outlook

CEO Confidence

Conference Board CEO survey

• Leading indicator of business investment
• Quarterly release

Using Sentiment in Analysis

What High Confidence Predicts

• Near-term consumer spending increases
• Durable goods purchases
• Major purchase timing (cars, homes)

What It Doesn't Predict Well

• Recession timing (often lags)
• Stock market direction
• Long-term economic trends

Combining Indicators

Best approach:

• Consumer confidence for spending outlook

• Michigan expectations for inflation

• Employment data for confirmation

Trading the Releases

Conference Board (Last Tuesday)

• Market-moving if big surprise
• Watch for revisions to prior month

Michigan (Mid-month & End-month)

• Preliminary release more market-moving
• Inflation expectations closely watched

Compare all sentiment indices on DataSetIQ to see the full picture.