US index futures are showing a modest increase this morning.
The University of Michigan Consumer Sentiment Index (MCSI) remains a vital gauge of how US consumers feel about their personal finances, business conditions, and the broader economic outlook. This monthly survey, now primarily conducted online with around 900-1,000 respondents, asks about current financial conditions and expectations for the future, including attitudes toward interest rates and economic growth. The index is calculated by subtracting pessimistic responses from optimistic ones, giving a headline number that reflects overall consumer confidence.
Consumer sentiment is critical because it influences consumer spending, which drives a large portion of economic activity. Despite recent macroeconomic uncertainties, how consumers feel about their finances, jobs, and inflation shapes their willingness to make purchases and investments, impacting GDP growth. Sentiment is considered “soft data”—based on survey perceptions and attitudes—whereas “hard data” refers to objective economic measurements like employment, income, or retail sales figures. Both types of data matter, but soft data often provides earlier signals of turning points in the economy, capturing changing consumer moods before they appear in hard numbers.
Recent MCSI readings have shown weakening sentiment, reflecting concerns over prices, labor markets, and personal finances, with inflation expectations remaining elevated. This mix of cautious consumer attitudes amid still resilient hard economic data creates a critical tension policymakers monitor closely. A decline in consumer confidence can precede reductions in spending, potentially slowing economic growth even if hard data remains strong for a time.