Two Measures of Consumer Attitudes: May 2024

Consumer attitudes are measured by two monthly surveys: the University of Michigan Consumer Sentiment Index (MCSI) and the Conference Board Consumer Confidence Index (CCI). In May, the MCSI fell to its lowest level in six months at 69.1. Meanwhile, the CCI rose for the first time in four months to 102.0.

Conference Board Consumer Confidence Index side by side comparison with University of Michigan Consumer Sentiment Index

Two Measures of Consumer Attitudes

While both indices aim to provide insight into consumers' attitudes towards their current financial well-being and their future economic expectations, they employ different methodologies and offer unique insights. The Consumer Confidence Index is more influenced by employment and labor market conditions from the worker's perspective and draws from a larger sample size. On the other hand, the Michigan Sentiment Index is more focused on household finances, the impact of inflation, and employment conditions from the business perspective. While the Michigan Sentiment Index uses a smaller sample size, the questions are more detailed and cover a broader range of topics.

Most economists tend to view the MCSI as a better leading indicator of future consumer spending given its greater focus on personal financial situations – in other words, a better measure of pocketbook issues like the price of gasoline. At the same time, many say the CCI tends to be better at picking up on lagging labor indicators related to the job market and job security – in other words, a better measure of financial conditions and real activity that have already turned. (Read more)

Having multiple methods to evaluate consumer attitudes enables a more diverse and broader analysis compared to relying solely on a single measure. Additionally, cross-referencing multiple measures allows for greater confidence in the accuracy of the trends identified.

Michigan Consumer Sentiment Index

The Michigan Consumer Sentiment Index (MSCI) is a monthly survey with two reports released each month; a preliminary report released mid-month and a final report released at the end of the month. The survey is conducted by the University of Michigan and interviews ~600 households each month with approximately 50 core questions covering three broad areas of consumer sentiment: personal finances, business conditions, and buying conditions.

Michigan Consumer Sentiment

Conference Board Consumer Confidence Index

The Conference Board Consumer Confidence Index (CCI) is a monthly survey released on the last Tuesday of each month. The survey is conducted by the Conference Board and interviews ~300 households each month. The index is based on a 5 question survey, with 2 questions related to present conditions (business conditions and employment) and 3 questions related to future expectations (business conditions, employment, and income). The survey began in 1967 and was conducted every two months but changed to monthly reporting in 1977, which is where our data begins.

Conference Board Consumer Confidence Index

CCI and MSCI: Comparison

In the chart below, I've overlayed the two indices beginning in 1977. At first glance, it may seem like consumer sentiment tends to run higher than consumer confidence but it's important to note that each index is graphed along a different axis with consumer confidence on the right (scale of 150) and consumer sentiment on the left (scale of 120). With that said, it's easy to see that they have generally followed a similar trend, however there are instances where they diverge. This discrepancy could be attributed to various factors, including differences in survey timing, variations in sample size, and nuances in question detail.

Conference Board Consumer Confidence Index overlayed with University of Michigan Consumer Sentiment Index

The Conference Board Consumer Confidence Index (CCI) tends to run higher than the University of Michigan Consumer Sentiment Index (MSCI). In fact, over our timeframe, it has registered a higher reading 70% of the time. But just how much higher? This next chart helps answer that question by showing the spread between the two indicators where we have subtracted MSCI from CCI. On average, the CCI has been 10.2 points higher than the MSCI, with the latest spread at 32.9.

Conference Board Consumer Confidence Index spread comparison with University of Michigan Consumer Sentiment Index

Another interesting feature in the chart above is when we see the MSCI surpass the CCI, as indicated by the purple shaded regions. Notably, these instances often coincide with the onset or lead up of a recession, as denoted by the gray bars.

This phenomenon can be attributed to the differing perspectives with regards to the labor market captured by the two surveys: the Michigan survey tends to be more business-oriented while the Conference Board survey focuses on the worker's standpoint. Consequently, during and immediately following recessions, the labor market typically experiences weakness. Hence, it's reasonable to observe the MSCI outpacing the CCI during these periods.

Conference Board Consumer Confidence Index spread comparison with University of Michigan Consumer Sentiment Index

One last observation about the spread (CCI minus MSCI): When the gap widens, indicating that the Conference Board number exceeds the Michigan number, it typically coincides with an increase in the Fed funds rate, as evidenced by the red line in the chart above.

Heightened pressure on the borrowers will then lead to reduction in consumption of durable goods, causing UMich's consumer sentiment to decrease first, while consumer confidence remains high, as the labor market, general consumption, and the stock market are still strong. After several rate hikes, while durable goods consumption continues to decline, companies begin to reduce investment and personnel costs, causing the labor market and consuming power in the private sector to stagnate. And as consumers become more conservative in spending, the gap between the two indices narrows down, and the stock market faces downward pressure. (Read more)

Comparing Consumer Attitudes on a Common Scale

This next chart normalizes each index around their mean, which allows for comparison between the two on a common scale. For both indices, we have divided each index value by the respective index average and then multiplied by 100. Values above 100 mean that the index is above its average, indicating higher confidence or sentiment. On the flip side, values below 100 mean that the index is below its average, indicating lower confidence or sentiment. By utilizing this method, the indices can be directly compared based on how much they deviate from their respective averages. I've plotted the monthly data points and included a 6-month moving average trendline to provide a clearer visual of the overall trend. We can see that the Conference Board's index is the more volatile of the two, with higher highs and lower lows, but it is clear that the two indicators have moved in the same general direction.

In May, the Conference Board Consumer Confidence Index was at 102.0 and the University of Michigan Consumer Sentiment Index was at 69.1. However, using the method described above, the Conference Board Consumer Confidence Index is now at 107.2 and the University of Michigan Consumer Sentiment Index is now at 81.4.

Conference Board Consumer Confidence Index overlayed with University of Michigan Consumer Sentiment Index

Importance of Consumer Attitudes

Consumer attitudes are closely monitored through indices like the MSCI and CCI because they help policymakers, businesses, investors, and economists gauge future economic conditions, as confidence levels tend to impact spending behavior. Since consumer spending accounts for approximately 70% of the economy, the spending habits of U.S. consumers have a major impact on economic growth. The general assumption is that when consumers are feeling optimistic, they will spend more which can stimulate economic growth through boosted demand, higher production, more job creation, and greater overall economic activity. However, if consumers are pessimistic then spending will decline which can slow economic growth as lower demand can lead to reduced production, cutting jobs, and lower income.

Additionally, and probably more importantly, consumer attitude data provides a human aspect to the economic data we receive monthly. While not everyone keeps up with GDP, inflation, and unemployment numbers, they are acutely aware of their own financial situation. People notice when gas and grocery prices strain their budget or when their place of work is facing tough times.


ETFs associated with sentiment include: Consumer Discretionary Select Sector SPDR Fund (XLY).

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