University of Michigan Consumer Sentiment Index
A survey-based indicator measuring U.S. consumers' economic outlook and sentiment
What is the University of Michigan Consumer Sentiment Index?
In one line: The University of Michigan Consumer Sentiment Index is a well-known sentiment indicator that puts a number on "how U.S. consumers feel about the current economy and their outlook for the future."
It's built by the Survey Research Center at the University of Michigan, which phones and surveys about 500 U.S. consumers every month. It started in 1946, making it the oldest consumer sentiment survey in the United States, with a history of nearly 80 years.
Why measure consumer sentiment? Because about 70% of U.S. GDP comes from consumer spending. When consumers feel "the economy is getting better," they open their wallets more, and when they feel "things are getting worse," they cut back. That's why consumer sentiment acts as a leading indicator for future consumer spending.
One reason the University of Michigan survey gets so much attention is that it also measures Inflation Expectations. It aggregates responses to questions like "How much do you think prices will rise over the next year?" and "How much do you think prices will rise over the next 5 to 10 years?" These inflation expectations are data the Federal Reserve (Fed) weighs heavily when setting interest rates.
English term
Michigan Consumer Sentiment, UMich Sentiment, ICS (Index of Consumer Sentiment)
Korean term
University of Michigan Consumer Sentiment Index, Michigan Consumer Confidence Index, Consumer Sentiment Index
What does it measure?
The University of Michigan survey asks consumers 5 core questions. The responses to these 5 questions are combined to create one overall index and two sub-indices.
Index of Consumer Sentiment (ICS)
This is the headline index that combines all 5 questions. When news says "Michigan Consumer Sentiment XX," they're talking about this number. The baseline is 1966 = 100. In other words, a reading of 100 means consumer sentiment is at the same level as in 1966.
Index of Current Economic Conditions (ICC)
This reflects the answer to "How is the economy doing right now?" It consists of 2 questions: (1) Compared to a year ago, how is your household's financial situation? (2) Is now a good time to buy big items like major home appliances? It behaves more like a coincident indicator, showing how the economy feels today.
Index of Consumer Expectations (ICE)
This reflects the answer to "How do you think the economy will do going forward?" It consists of 3 questions: (1) Household financial outlook one year from now, (2) overall business conditions outlook one year from now, (3) overall business conditions outlook five years from now. It acts more as a leading indicator, so it's officially part of the U.S. Leading Economic Index (LEI).
Inflation Expectations:
1-Year Ahead Inflation Expectation
"How much do you think prices will rise over the next 12 months?" It shows the short-term price outlook and is heavily influenced by recent consumer experiences (gas prices, grocery costs, etc.).
5–10 Year Ahead Inflation Expectation
"What do you think the average annual rate of price increase will be over the next 5 to 10 years?" It shows long-term inflation expectations. This is a number the Fed watches closely, and when it rises above 3%, a warning light goes on.
Worth knowing: The baseline for the University of Michigan index is Q1 1966 = 100. Historically, readings above 100 were seen during the 2000s boom, it fell to 55 during the 2008 financial crisis, and it plunged to 50 again during the 2022 inflation shock before gradually recovering. Readings between 80 and 100 are generally considered healthy.
Key distinctions: all you need to know
To read the University of Michigan Consumer Sentiment Index correctly, you need to understand a few key distinctions.
1. Preliminary vs. Final
Preliminary
Released on the second Friday of each month. It's calculated from roughly 250–300 responses out of the 500 total. Because it hits the market first, it tends to trigger a bigger market reaction than the final reading.
Final
Released on the fourth Friday of each month. This is the final number that incorporates the remaining responses. If there's little revision from the preliminary, the market reaction is small, but large revisions attract attention.
Preliminary vs. Final -- which should you watch? If you're a trader, watch the preliminary. It's the first signal, so market volatility is larger and it offers a chance to adjust positions. If you're a long-term investor, the trend in the final reading is more meaningful. That said, if there's a large revision between preliminary and final (e.g., preliminary 67 -> final 62), the market can react strongly.
2. Current Conditions Index vs. Expectations Index
Current Conditions Index (ICC)
A coincident indicator. It reflects "what things are like right now" and reacts to economic changes that have already happened (employment situation, income changes, etc.), making it useful for confirming the current state of the economy alongside other indicators.
Expectations Index (ICE)
A leading indicator. It reflects "what people think will happen going forward." It's also an official component of the Conference Board's Leading Economic Index (LEI). For investors, the direction of this Expectations Index is more important.
3. Inflation Expectations -- the number the Fed watches most closely
Let me explain simply why inflation expectations matter. When consumers think "prices are going to rise a lot," they try to buy things before that happens, right? That behavior increases demand and actually pushes prices higher. This is called self-fulfilling inflation.
That's why the Fed closely monitors whether inflation expectations are "anchored." If the 5–10 year expectation stays in the 2.5–3.0% range, it's considered "well anchored." If it significantly exceeds 3%, there's growing concern that "expectations are starting to de-anchor." During the 2022 inflation scare, the 1-year expectation spiked to 5.4%, but the 5–10 year expectation stayed around 3.0–3.1%, which gave the Fed some relief.
Why does it matter? -- Impact on the markets
There are three big reasons the University of Michigan Consumer Sentiment Index gets so much attention in the markets.
First, it's a leading indicator for the 70% of the U.S. economy made up of consumer spending. Historically, there's a repeating pattern where consumer sentiment drops, and 2–3 months later retail sales also slow down. In 2021–2022, consumer sentiment fell sharply, but actual spending held up for a while before retail sales growth slowed significantly in the second half of 2022.
Scenario: Consumer Sentiment Rising
Spending outlook: A signal that consumers are ready to open their wallets -> expectation of higher retail sales
Stocks: Rising earnings expectations for consumer companies (Amazon, Nike, Starbucks, etc.)
Economic outlook: A signal of economic expansion -> risk-on sentiment
Scenario: Consumer Sentiment Falling
Spending outlook: Concern about consumer slowdown -> expectation of weaker retail sales
Stocks: Downward pressure on cyclicals (consumer discretionary, travel, leisure)
Safe havens: When recession fears rise, demand increases for safe assets like Treasuries and gold
Second, inflation expectations directly affect the Fed's interest rate decisions. The Fed Chair often mentions the University of Michigan inflation expectations directly in FOMC press conferences. In June 2022, when the University of Michigan 1-year inflation expectation surged to 5.4%, the Fed made the aggressive decision to raise rates by 75 basis points just a month later.
Scenario: Inflation Expectations Surge
Rates: The Fed turns more hawkish -> possibility of extended rate hikes or rate hold
Bonds: Expectation of higher rates -> Treasury prices fall (yields rise)
Stocks: Particularly pressures growth stocks (Nasdaq) -> value stocks/energy stocks relatively stronger
Third, it serves as an early warning system for recessions. Historically, there have been several cases where the consumer sentiment index dropped sharply and a recession followed within 6–12 months. In mid-2007, consumer sentiment started falling sharply, and about 6 months later, in December 2007, an official recession began. Of course, falling sentiment doesn't always lead to a recession, but if it falls for 3 or more months in a row, it's worth paying close attention.
Real-world example (2024–2025): In the second half of 2024, the consumer sentiment index showed a gradual recovery in the 67–70 range, and U.S. consumer spending continued to grow steadily. In particular, the 5–10 year inflation expectation stayed stable around 2.8–3.0%, which became one of the reasons the Fed could move forward with gradual rate cuts. On the other hand, in early 2025, the sentiment index turned down again due to uncertainty over tariff policy, raising concerns about a consumer slowdown.
Release schedule and how to check it
The University of Michigan Consumer Sentiment Index is released twice a month, which is a very unique schedule.
Preliminary
Released on the second Friday of each month at 10:00 AM U.S. Eastern Time (11:00 PM Korea time during daylight saving time / midnight during standard time). It's the first sentiment snapshot of the month and tends to trigger a larger market reaction.
Final
Released on the fourth Friday of each month at the same time. This is the final figure that incorporates additional survey responses. If the difference from the preliminary is small, the market reaction is minor, but large revisions get attention.
The release time is unique!
Most economic indicators are released pre-market (8:30 AM ET), but the University of Michigan sentiment index is released during market hours (10:00 AM ET). Because it's released while the market is already open, you can see stock prices move immediately after the release. If inflation expectations come in far from forecasts, the interest rate futures market also reacts right away.
Four key numbers to check together at release:
Index of Consumer Sentiment (ICS)
Headline number -- direction vs. previous month
Index of Consumer Expectations (ICE)
Leading indicator -- future direction of spending
1-Year Inflation Expectation
Short-term price outlook -- high volatility
5–10 Year Inflation Expectation
Long-term inflation expectation -- closely watched by the Fed
How investors can use it
Here are four practical strategies for using the University of Michigan Consumer Sentiment Index in investing.
Strategy 1: Adjust consumer discretionary positions based on the sentiment trend
When consumer sentiment is in a rising trend for 3 consecutive months -> consider increasing exposure to the Consumer Discretionary sector. Examples include Amazon (AMZN), Tesla (TSLA), Nike (NKE), and Starbucks (SBUX). Conversely, when sentiment is in a 3-month downtrend, shift exposure toward Consumer Staples or other defensive names.
Key point: Look at the 3-month trend, not single-month moves. A one-month change can be noise, but three consecutive months in the same direction is more likely to reflect a real shift in consumer behavior.
Strategy 2: Gauge the rate direction from inflation expectations
If the 1-year inflation expectation is rising -> rate cuts from the Fed are more likely to be delayed. In that case, it's wise to reduce exposure to long-duration Treasuries (TLT) and rotate into short-duration Treasuries (SHV, BIL) or floating-rate bonds (FLOT).
Conversely, if inflation expectations stabilize or fall, expectations of rate cuts grow and long-duration Treasury prices can rise. The key threshold is whether the 5–10 year expectation crosses 3%.
Strategy 3: Use the revision from preliminary to final
There are roughly two weeks between the preliminary and the final release. During this period, you can monitor consumer-related news (retail sales flash reports, earnings from major retailers, etc.) to gauge the direction of the final revision.
Practical tip: When the preliminary number surprises the market significantly, watch the revision pattern in the final. If the preliminary surprise is maintained in the final, you can gain confidence in the trend; if it's reversed, the move was likely just temporary noise.
Strategy 4: Spot divergences between sentiment and actual spending
Sometimes consumer sentiment and actual consumer behavior diverge. It's the "feeling bad but still spending" phenomenon. A typical example was 2022–2023, when consumer sentiment was near historic lows but actual spending (retail sales) remained solid.
Key point: If sentiment is low but retail sales are strong -> consumer stocks may still be fine for a while (actual behavior matters more than feelings). Conversely, if sentiment is high but retail sales are weak -> sentiment may soon fall. Always check sentiment alongside retail sales.
Related economic indicators
These are indicators you can look at alongside the University of Michigan Consumer Sentiment Index for a more accurate read.
Comparison with the CB Consumer Confidence Index
When the University of Michigan and CB indices move in the same direction, the signal is more reliable. When they diverge -- e.g., University of Michigan falling while CB rises -- it can signal a gap between the labor market and consumer anxiety. This is because the University of Michigan index is more sensitive to inflation perceptions, while CB is more sensitive to the labor market.
Relationship with Retail Sales
Consumer sentiment shows "the willingness to spend," while retail sales show "actual spending." There's usually a 1–3 month lag between a drop in sentiment and a slowdown in retail sales. Monitoring both lets you spot a consumer slowdown earlier.
Relationship between inflation expectations and CPI/PCE
If University of Michigan inflation expectations are rising and CPI/PCE are also trending higher -> it's a strong warning that inflation is becoming entrenched. If only expectations rise while actual CPI stays stable, it's more likely just temporary anxiety.
Frequently Asked Questions (FAQ)
Q. When is the University of Michigan Consumer Sentiment Index released?
A. It's released twice a month. The preliminary comes out on the second Friday of each month, and the final on the fourth Friday. The release time is 10:00 AM U.S. Eastern Time. In Korea time, that's 11:00 PM during daylight saving time (March–November) and midnight during standard time (November–March). Because it's released while the market is already open, you can see an immediate stock price reaction.
Q. What's the difference between the University of Michigan index and the CB Consumer Confidence Index?
A. There are three main differences. First, the University of Michigan surveys about 500 people, while CB surveys about 3,000 households. Second, the University of Michigan index focuses on inflation expectations and financial conditions, while CB focuses on labor market perceptions. Third, the University of Michigan index is released on the second/fourth Friday of each month, while CB is released on the last Tuesday of each month. Since the University of Michigan index comes out first, it works well as "the first signal" of consumer sentiment.
Q. What level of the consumer sentiment index is considered good?
A. The trend matters more than the absolute level, but here's a rough guide. Above 100 means very strong sentiment (2000s boom level), 80–100 is healthy, 60–80 is neutral to somewhat pessimistic, and below 60 indicates severe pessimism (2008 financial crisis, 2022 inflation shock levels). However, what the market focuses on is not the absolute number, but the "result vs. expectations" and the "direction vs. the previous month."
Q. Why do inflation expectations get so much separate attention?
A. Because inflation expectations can become a "self-fulfilling prophecy" for actual inflation. When consumers expect prices to rise, they buy more in advance, workers demand higher wages, and businesses raise prices. All of these behaviors together create a vicious cycle that actually pushes prices higher. That's why the Fed always monitors whether inflation expectations remain "anchored," and when they deviate significantly, it responds with strong monetary policy.
Q. If the consumer sentiment index falls, do stocks always go down?
A. No. Consumer sentiment and the stock market don't always move in the same direction. In fact, in 2022, consumer sentiment fell to near historic lows (around 50), but the S&P 500 managed to bounce back after its October 2022 low. Consumers were psychologically squeezed by inflation, but the labor market was solid and wages were rising, so actual spending held up. The stock market reacts more to "future earnings outlook" than to "current feelings," so judging stock direction based only on the sentiment index is risky.
Q. Which matters more: the preliminary or the final reading?
A. From a short-term trading perspective, the preliminary matters more. It's the first signal to hit the market, so volatility is larger and it offers a chance to adjust positions. From a long-term investing perspective, monitoring the trend in the final reading is more meaningful. That said, if the revision between preliminary and final is more than 3–5 points, it can serve as an additional signal that the month's economic environment is changing quickly, so it's worth a close look.