Consumer sentiment or Index of Consumer Sentiment (ICS) is a very important report created by the University of Michigan’s Consumer Survey Center that calculates consumer optimism about the American economy. This report is compiled and created by taking survey of 500 American households every month. The compilers on this report ask questions about financial conditions and attitudes about the economy. The consumer sentiment is directly proportional to the consumer ability to spend their earnings on goods and services. Consumer sentiments and consumer confidence sentiment are two ways of seeing the consumer behaviors. The report regarding consumer sentiment also known as the Michigan survey while consumer confidence is also known as The Conference Board’s survey.
Importance:
The measurement of consumer spending behaviors and consumer sentiments are very important for any economy as spending leaves a foremost influence on an economy . For instance: strong economic growth helps in earning high level of corporate profits and higher stock prices. On the other hand bondholders analyse the economic growth and inflation rates. Investor should keep in mind that a good economy always walks that fine line between excessive inflationary growth ans strong growth .The share of consumer spending is always remains close to 2/3rd of the total GDP. Therefore, it is very important for investors to get an overview about thinking of consumers and how they are planning to spend their money in upcoming months. We can say that this index gives very good insight of the direction of the economy. However, it should be noted that there is a weak direct relationship between consumer confidence and sales growth in an economy.
Background:
The Michigan index is almost similar to the Conference Board Consumer Confidence index. However, it should be noted that this index has two releases in a month. Moreover, it has 2 sub indexes like Conference Board index, it has two sub-indexes which consist of current and future expectations. The expectations index consist of the Conference Board’s Leading Indicators index.
Source:The University of Michigan.
Release Time:Preliminary: 10:00 ET on the second Friday of the month (data for current month); Final: 10:00 ET on the fourth Friday of the month (data for current month).