The indexes of consumer sentiment and confidence: Leading or misleading guides to future buyer behavior

Abstract

The University of Michigan Survey Research Center's indexes of consumer sentiment and expectations and the Conference Board's index of consumer confidence and expectations are analyzed using time-series methods. The indexes were examined for a priori information content about a number of important variables associated with forecasting product demand and aggregate buyer behavior patterns. The empirical findings suggest that the indexes are useful in predicting future values of aggregate consumer spending and business and economic activity. The Michigan measure appears to outperform the Conference Board measure when predicting durable good purchases, whereas the reverse is true for general economic activity. Both measures are useful for predicting business activity.