What Is the Michigan Consumer Sentiment Index?
The Michigan Consumer Sentiment Index (MCSI) is a monthly survey of consumer confidence levels in the United States conducted by the University of Michigan. The survey is based on telephone interviews that gather information on consumer expectations for the economy.
- The Michigan Consumer Sentiment Index (MCSI) is a monthly survey of how consumers feel about the economy, personal finances, business conditions and buying conditions.
- The University of Michigan conducts the telephone survey. It releases a preliminary report mid-month and a final report at the end of the month.
- The MCSI is seen as an important leading economic indicator, as consumer spending accounts for about 67% of the U.S. economy.
Understanding the Michigan Consumer Sentiment Index (MCSI)
The preliminary report is generally released during the middle of the month and covers survey responses collected in the first two weeks of the month. The final report is released at the end of the month and covers the full month.
George Katona founded the survey at the University of Michigan in 1946. It is designed to capture the mood of American consumers. Whether the sentiment is optimistic, pessimistic or neutral, the survey signals information about near-term consumer spending plans.
Because consumer spending accounts for about 67% of gross domestic product (GDP) in the U.S, the MCSI is regarded as one of many important economic indicators followed by businesses, policymakers and participants in the investment community.
MCSI Basic Design
Each month, the university conducts a minimum of 500 phone interviews across the continental U.S. The survey asks 50 core questions and covers three areas: personal finances, business condition and buying conditions. Consumers are asked 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." Surveys have demonstrated their ability to accurately anticipate changes in interest rates, unemployment rates, inflation rates, GDP growth, housing, car demand and other key economic measures.