Consumer Sentiment
A survey-based gauge of how optimistic or pessimistic consumers are about the economy and their own finances — a window into consumption ahead.
In plain terms
Consumer sentiment surveys people with questions like "how do you think the economy is doing?" and "are you thinking of buying big-ticket items?" to turn how optimistic or pessimistic consumers are into a number.
Leading ones are the University of Michigan's consumer sentiment index and the Conference Board's consumer confidence index. Both are similar indicators measuring "the temperature of the consumer's mind."
What it tells you
When people are optimistic about the future they open their wallets; when anxious they close them. So consumer sentiment is used as a "leading signal" that moves a step ahead of actual consumption (retail sales).
Since consumption is a big share of the US economy, cooling consumer sentiment is sometimes read as an early warning of slowing growth.
Formula
consumer sentiment = households surveyed on the economy, income, and buying intentions, turned into an index leading ones: the University of Michigan consumer sentiment index · the Conference Board consumer confidence index
What high or low means
A rising sentiment index is read as an expectation that consumption will grow; a falling one, as worry that it will shrink. But sentiment and actual consumption do not always match (people sometimes spend even when anxious).
The direction (improving/worsening) matters more than a single month's number.
The sentiment index is a "survey (the mind)," so it often diverges from actual behavior (consumption). It is common for people to answer "the economy is bad" while continuing to spend. Sentiment is a reference, not a certainty.
It can be swayed short-term by the political and news mood, so read the trend rather than one number.
Consumer sentiment is a macro indicator. This term is background for understanding market news. (※ Our screen handles individual companies' SEC-filed financials.)
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Consumer and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.