Forget The Headline Number, The Michigan Consumer Sentiment Index Was Still Ugly

The University of Michigan Consumer Sentiment Index preliminary report for November came in at 69.3, a slight improvement from the 67.7 reading of the final report for October. This is fractionally higher than the 69.0 forecast of economists polled by Bloomberg, so the press will likely tout today’s number as “better than expected.” Today’s number is well off the high for the year, which the June reading of 76.0.

See the chart below for a long-term perspective on this widely watched index. Because the sentiment index has trended upward since its inception in 1978, I’ve added a linear regression to help understand the pattern of reversion to the trend. I’ve also highlighted recessions to help evaluate the Michigan Consumer Sentiment Index as an indicator of the broader economy.



To put today’s “better than expected” report into the larger historical context since its beginning in 1978, consumer sentiment is about 20% below the average reading, 19% below the geometric mean, and 21% below the regression line on the chart above.

For the sake of comparison here is a chart of the Conference Board’s Consumer Confidence Index (monthly update here). The Conference Board Index is the more volatile of the two, but the general pattern and trend are remarkably similar to the Michigan Index.



And finally, the prevailing mood of the Michigan survey is also similar to the mood of small business owners, as captured by the NFIB Business Optimism Index (monthly update here).

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