What is it?
The University of Michigan publishes preliminary results of their survey around mid-month and final results near the beginning of the following month. The survey is very similar in design and structure to the Conference Board's Consumer Confidence Index, with sentiment about current conditions given 40% weight and future expectations given the remaining 60%. A minimum of 500 households are surveyed by telephone. The sample is designed to be representative of US households, with the exception of Alaska and Hawaii.
To its credit, the Index is part of the Commerce Department's Leading Indicator Composite Index. Also, consumer spending comprises roughly two-thirds of the US economy, so it would seem quite informative to have insight into consumers' attitudes.
In reality, though, the Index is given little direct attention by market players, and only sometimes does it move markets. Most investors combine the results with other gauges of attitudes before making decisions. Studies have been performed that confirm this skepticism. Some of these cautionary studies have found a high degree of 'rationality' to the survey responses (they make sense). However, more than one study has concluded that consumer sentiment surveys actually hold little predictive value for the markets.
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