Conflicting Measures

  • The Consumer Sentiment Index is a measurement by the University of Michigan.
  • The Consumer Confidence Index (CCI) is a survey conducted by the Consumer Conference Board.

Both purportedly measure the same thing. Clearly one of them is very wrong.

Tariffs Weaken Confidence

The University of Michigan reports Tariffs Weaken Confidence.

The Consumer Sentiment Index posted its largest monthly decline in August 2019 (-8.6 points) since December 2012 (-9.8 points), according to the University of Michigan Surveys of Consumers.

The 2012 plunge reflected widespread fears among consumers that they would be pushed off the “fiscal cliff” due to rising taxes and falling government spending, said U-M economist Richard Curtin, director of the surveys.

The recent decline is due to negative references to tariffs, which were spontaneously mentioned by one-in-three consumers, he said. Unlike concerns about the fiscal cliff, which were promptly resolved, Trump’s tariff policies have been subject to repeated reversals amid threats of higher future tariffs.

Such tactics may have some merit in negotiations with China but act to increase uncertainty and diminish consumer spending at home, Curtin said. Unlike the repeated tariff reversals, negative trends in consumer sentiment cannot be easily reversed.

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“The August data indicate that the erosion of consumer confidence due to tariff policies is now well under way,” Curtin said. “Compared with those who did not reference tariffs, consumers who made spontaneous negative references to tariffs also voiced higher year-ahead inflation expectations, more frequently expected rising unemployment, and expected smaller annual gains in household incomes.

Biggest Drop Since 2012

Bloomberg reports U.S. Consumer Sentiment Falls Most Since 2012 on Trade Fears

Here's the paragraph that caught my eye.

The Conference Board’s confidence measure eased in August but posted the best assessment of current conditions since 2000. Bloomberg’s weekly comfort gauge rose for a second week, while the monthly expectations saw more Americans reporting the economy’s getting worse.

Sentiment: What are they Really Measuring?

Both surveys purport to measure the same thing. So what the hell are they really measuring?

I seldom follow these reports precisely because I believe the measurements are mostly nonsense.

Today's amusing report confirms my view.

Mike "Mish" Shedlock