Michigan Consumer Sentiment

The Index of Consumer Sentiment (ICS) is a monthly US household survey from the University of Michigan Surveys of Consumers, started in 1946. It covers adults 18 and older in the coterminous United States, the 48 states plus the District of Columbia, using a rotating panel. Each month asks about 50 questions of some 1000 interviews, but ICS uses 5, split into Current Conditions (ICC) and Expectations (ICE). It tracks opinions, not spending or inflation, and differs from its own inflation series and the Conference Board survey.

The survey runs monthly with 2 releases: a preliminary release around the 2nd Friday and a final release around the last Friday. Interviewing starts the Tuesday before the prior final release, runs through the Monday before each release, and shifts off pattern around November and December holidays. Each release adds 2 sub-indexes, 5 components, inflation expectations, and demographic splits, and the final replaces the preliminary. Higher means more favorable attitudes, direction matters most, and only moves of 4.8 ICS points or 6 sub-index points clear 95% confidence.

ICS adds 5 questions with equal weight, so each question can move the headline.

• Personal finances now (PAGO): whether households feel better or worse off than a year ago.
• Buying conditions for large goods (DUR): whether it is a good or bad time to buy major household items.
• Personal finances ahead (PEXP): expected household finances a year ahead.
• Business outlook, 12 months (BUS12): whether the next year brings good or bad financial times.
• Business outlook, 5 years (BUS5): whether the next 5 years bring good times or unemployment and depression.

On June 24, 2022, final ICS hit 50.0, its record low at the time, down from 58.4 in May and 85.5 a year earlier. Current conditions fell to 53.8 and expectations to 47.5, as 12-month business outlook slid to 35 from 46 and current finances to 72 from 91. High gas prices and inflation fears outweighed expected income gains, crushing every component at once. In July 2022 the headline rose to 51.5 while expectations fell to 47.3, since current conditions rebounded from 53.8 to 58.1.

1. Relative score: for each of the 5 questions, subtract unfavorable % from favorable %, add 100, and round. For example, 60% favorable minus 30% unfavorable gives 130.
2. Index formula: divide the rounded sum by the 1966 base total, the reference year set to 100, and add 2.0. ICS uses all 5 over 6.7558, ICC uses 2 current questions over 2.6424, and ICE uses 3 expectations questions over 4.1134.
3. Worked example: take rounded scores of 130, 140, 120, 110, and 125: ICS equals 625 divided by 6.7558 plus 2.0, or 94.5. The same inputs give ICC of 98.5 and ICE of 91.9.
4. No seasonal adjustment: the method applies no seasonal step; the index is relative scores over the base total plus a constant.