Michigan Consumer Expectations

The Index of Consumer Expectations (ICE) measures household optimism about future finances and business conditions. It comes from the University of Michigan Surveys of Consumers, run by the Survey Research Center in the Institute for Social Research. The monthly series began in January 1978 within a programme founded in 1946, and each survey asks about 50 core questions. The sample represents adults 18 and older in the coterminous United States, the 48 states plus the District of Columbia, excluding Alaska and Hawaii.

It uses a rotating panel that mixes fresh interviews with re-interviews from about 6 and 12 months earlier. It tracks attitudes, not actual spending, retail sales or inflation. Here Michigan means the university, not a state-only sample, and the index feeds leading activity gauges.

Interviewing starts the Tuesday before the prior month final release and runs through the month, with November and December schedules shifting slightly for holidays. The preliminary release covers responses through the Monday before the mid-month Friday, while the final covers responses through the Monday before the end-month Friday. Two Friday releases follow each month, a preliminary estimate from about 420 interviews and a final from about 1000, usually at 10 a.m. Eastern time.

Each release also shows overall sentiment and inflation expectations, with the 5 component scores, and the preliminary is replaced by the final. Published values are not routinely revised, and detailed tables appear after a 4-week embargo. Higher means more optimism.

Three equally weighted questions drive the index, covering personal finances and near-term and long-term business outlook.

• Personal finances expected: whether the family will be better or worse off financially a year from now.
• Business outlook, 12 months: whether the country will face good or bad financial times over the next 12 months.
• Business outlook, 5 years: whether the next 5 years bring continuous good times or widespread unemployment and depression.

The June 24, 2022 final release put sentiment at 50.0, down from 58.4 in May and 85.5 in June 2021. That was the lowest reading on record at the time. Current conditions stood at 53.8 and expectations at 47.5, versus 63.3 and 55.2 in May. The final interviews moved the two sub-indices in opposite directions, from preliminary 55.4 to 53.8 for current conditions and from 46.8 to 47.5 for expectations.

About 79% expected bad business times in the year ahead, the highest share since 2009, and 47% blamed inflation for eroding living standards. Median year-ahead inflation expectations were 5.3% and long-run expectations 3.1%, with half of consumers mentioning gas prices.

1. Relative score: For each question, subtract the % unfavourable replies from the % favourable replies, then add 100 and round to the nearest whole number. For example, shares of 40% favourable and 35% unfavourable give 40 minus 35 plus 100, or 105.
2. Index formula: Add the 3 scores for finances, 12-month and 5-year outlooks. Divide by the 1966 base total of 4.1134, and add 2.0, an early sample-design correction. For example, scores of 105, 105 and 115 sum to 325, 325 divided by 4.1134 gives 79.0, plus 2.0 gives 81.0.
3. Weighting: Responses are adjusted for household selection chances and raked, a demographic adjustment, to Census population distributions, with new and repeat respondents handled separately.
4. Seasonality: It applies no seasonal correction for calendar effects.
5. Scale and significance: It uses the 1966 first-quarter value of 100 as a scale anchor, not an optimism cutoff. A monthly move of at least 6 points marks a meaningful change, significant at the 95% level for the expectations index.