Michigan Consumer Sentiment Index MCSI What it Means Uses
Michigan Consumer Sentiment Index (MCSI): What it Means, Uses
What Is the Michigan Consumer Sentiment Index (MCSI)?
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 gathers information on consumer expectations for the economy through telephone interviews.
Consumer sentiment is a statistical measurement of the health of the economy as determined by consumer opinion. It considers people’s feelings toward their current financial health, short-term economy, and prospects for long-term economic growth. The MCSI is considered a useful economic indicator.
Key Takeaways
– The Michigan Consumer Sentiment Index (MCSI) is a monthly survey of consumer feelings about the economy, personal finances, business conditions, and buying conditions.
– The University of Michigan conducts the survey and releases a preliminary report mid-month and a final report at the end of the month.
– The MCSI is an important leading economic indicator, as consumer spending accounts for about 68.1% of the U.S. economy.
Understanding the Michigan Consumer Sentiment Index (MCSI)
The Michigan Consumer Sentiment Index was created in the 1940s by Professor George Katona at the University of Michigan’s Institute for Social Research. It is a national telephone survey conducted monthly by the university. The survey asks consumers about their views on personal finances, short-term, and long-term state of the U.S. economy.
The preliminary report is 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, capturing the mood of American consumers and their near-term spending plans.
As consumer spending accounts for about 68.1% of GDP in the U.S., the MCSI is regarded as an important economic indicator followed by businesses, policymakers, and participants in the investment community.
MCSI Basic Design
Each month, the university conducts a minimum of 500 telephone interviews across the continental U.S., asking 50 core questions that cover personal finances, business conditions, and buying conditions. The answers to these questions form the basis of the index. Consumers are asked questions such as:
– Are business conditions better or worse than a year ago?
– Are you better off or worse off financially than a year ago?
– Do you expect to be better off financially in a year?
– What do you think will happen to interest rates for borrowing money in the next 12 months?
– Do you expect prices to go up, down, or stay the same in the next 12 months?
About 60% of each monthly survey consists of new responses, while 40% is drawn from repeat surveys. Repeat surveys help reveal changes in consumer sentiment over time and provide a more accurate measure of consumer confidence.
Special Considerations
According to the University of Michigan, the surveys "have proven to be an accurate indicator of the future course of the national economy." They accurately anticipate changes in interest rates, unemployment rates, inflation rates, GDP growth, housing, car demand, and other key economic measures.
The Index of Consumer Expectations (ICE) is a subsidiary survey of the MCSI and is included in the larger index of Leading Composite Indicators published by the Bureau of Economic Analysis (BEA) through the Department of Commerce.
