The University of Michigan Consumer Sentiment Index (MCSI) is derived from a survey that measures personal consumer confidence in economic activities. Consumer optimism is closely linked to consumer spending, which constitutes a significant portion of a nation's economic activity. Additionally, consumer sentiment can indicate potential cyclical shifts in the economy.

The Index was established and published with several key objectives:

• To evaluate current consumer attitudes regarding the business environment, personal finances, and spending habits.
• To enhance understanding of and predict changes in the national economy.
• To offer a method for integrating empirical measures of consumer expectations into spending and saving behavior models.
• To assess consumers' economic expectations and likely future spending patterns.
• To determine the level of consumer optimism or pessimism.

Why is it important?

This index measures consumer perceptions of their financial and income situations. Since consumer spending represents over two-thirds of the economy, markets are keenly interested in consumer behavior and potential future actions. Higher consumer optimism about the economy and personal finances typically leads to increased spending. Therefore, this index of consumer attitudes provides valuable insights into economic trends.

Economists and analysts often prefer this survey over the Conference Board’s Consumer Confidence Index for early indications of the Non-Farm Payroll (NFP) data. This preference is due to the fact that the data includes interviews conducted just a day or two before the official release, making it a reliable real-time indicator of consumer sentiment. According to the University of Michigan, these surveys have consistently proven to be accurate predictors of the national economy's future trajectory.

How to read it?

Also known as the Index of Consumer Sentiment (ICS), this report from the University of Michigan’s Consumer Survey Center assesses consumer optimism regarding the US economy. Each month, 500 households are contacted and surveyed about their financial situations and economic attitudes, with fifty core questions posed.

Respondents are asked about their perspectives on three key areas:

• Their personal financial situation
• The short-term outlook for the general economy
• The long-term outlook for the general economy

Consumer sentiment is directly tied to the robustness of consumer spending. The terms consumer confidence and consumer sentiment are often used interchangeably to describe consumer attitudes. Among economic reports, consumer sentiment specifically refers to the Michigan survey, while consumer confidence pertains to The Conference Board’s survey. The Michigan index closely resembles the Conference Board Consumer Confidence index, although it features two monthly releases: a preliminary and a final reading. Like the Conference Board index, it includes two subindexes: expectations and current conditions, with the expectations index being a component of the Conference Board’s Leading Indicators index.

Where to find it?

You can locate the event listing for the index on BabyPips.com’s economic calendar. The index figures are published bi-monthly, consisting of a preliminary release in the middle of the month and a final report at the end of the month.

What time is it released?

The preliminary release occurs at 10:00 am ET on the second Friday of each month, while the final release is at 10:00 am ET on the fourth Friday of each month.