What Is the Michigan Consumer Sentiment Index?
The Michigan Consumer Sentiment Index (MCSI) is a monthly survey of U.S. consumer confidence levels conducted by the University of Michigan. It is based on telephone surveys that gather information on consumer expectations regarding the overall economy.
Michigan Consumer Sentiment Index (MCSI)
The preliminary report, which includes about 60% of total survey results, is released around the 10th of each month. A final report for the prior month is released on the first of the month. The index, introduced in 1946 by George Katona at the university, is designed to capture the mood of American consumers with regard to their economic well-being and outlook. Whether the sentiment is optimistic, pessimistic or neutral, it signals general information about near-term consumer spending plans. Because consumer spending accounts for roughly 70% of U.S. gross domestic product (GDP), the MCSI is regarded as one of the many important economic indicators followed by businesses, policymakers, and participants in the investment community.
MCSI Basic Design
Each month a minimum of 500 phone interviews are conducted across the continental U.S. There are around 50 core questions that cover three broad areas of consumer sentiment: personal finances, business condition, and buying conditions. Consumers are asked such questions such as:
- "Would you say that at the present time business conditions are better or worse than they were a year ago?"
- "Would you say that you (and your family living there) are better off or worse off financially than you were a year ago?"
- "Do you think that a year from now you (and your family living there) will be better off financially, or worse off, or just about the same as now?"
- "What do you think will happen to interest rates for borrowing money during the next 12 months — will they go up, stay the same, or go down?"
- "During the next 12 months, do you think that prices, in general, will go up, or go down, or stay where they are now?"
According to the University of Michigan, the surveys "have proven to be an accurate indicator of the future course of the national economy." The U.S. Department of Commerce acknowledges its utility, including it in the Leading Indicator Composite Index published by the Bureau of Economic Analysis. Surveys have demonstrated their ability to accurately anticipate changes in interest rates, unemployment rates, inflation rates, GDP growth, housing, and car demand and other key economic measures.