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How Should We Measure Consumer Confidence (Sentiment)? Evidence from the Michigan Survey of Consumers

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Jeff Dominitz
Charles F. Manski

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Abstract

The Michigan Index of Consumer Sentiment (ICS) and other indices of consumer confidence are prominent in public discourse on the economy but have little presence in modern economic research. The sparsity of modern research follows an earlier period when economists scrutinized in some depth the methods and data used to produce consumer confidence indices. The literature to date has focused on the predictive power of the survey data used to form the indices; there has been very little study of their micro foundations. This paper analyzes the responses to eight expectations questions that have appeared on the Michigan Survey of Consumers in the period June 2002 through May 2003. Four questions elicit micro and macroeconomic expectations in the traditional qualitative manner; two are components of the ICS. Four questions use a percent chance' format to elicit subjective probabilities of micro and macroeconomic events; versions of these questions have previously appeared in the Survey of Economic Expectations.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9926.

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Date of creation: Aug 2003
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Handle: RePEc:nbr:nberwo:9926

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D1 - Microeconomics - - Household Behavior
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Caskey, John P, 1985. "Modeling the Formation of Price Expectations: A Bayesian Approach," American Economic Review, American Economic Association, vol. 75(4), pages 768-76, September. [Downloadable!] (restricted)
  2. Dominitz, Jeff, 2001. "Estimation of income expectations models using expectations and realization data," Journal of Econometrics, Elsevier, vol. 102(2), pages 165-195, June. [Downloadable!] (restricted)
  3. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December. [Downloadable!] (restricted)
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  4. J. Dominitz & C. F. Manski, . "Perceptions of Economic Insecurity: Evidence from the Survey of Economic Expectations," Institute for Research on Poverty Discussion Papers 1105-96, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
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  5. Das, M. & Dominitz, J. & Soest, A. van, 1997. "Comparing predictions and outcomes : theory and application to income changes," Discussion Paper 45, Tilburg University, Center for Economic Research. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maurizio Bovi, 2006. "Consumers Sentiment and Cognitive Macroeconometrics Paradoxes and Explanations," ISAE Working Papers 66, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
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  2. Jeff Dominitz & Charles F. Manski, 2005. "Measuring and Interpreting Expectations of Equity Returns," NBER Working Papers 11313, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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