When it comes to measuring consumer confidence, the two best-known surveys are published by the University of Michigan and the Conference Board. Both are widely followed and respected, but they measure slightly different things.
The Conference Board’s survey measures indicators that tend to do well late into an economic cycle—such as the job market and job security—while the Michigan survey is better at measuring pocketbook issues like the price of gasoline. Because of this, their results tend to differ from time to time, as a sudden rise in gas prices or a drop in the stock market can affect their measures differently.
Take now, for example. In our featured chart above, we take the University of Michigan’s Consumer Sentiment Index and subtract the Conference Board’s Consumer Confidence Index.
Currently, this measure is at its lowest reading on record, meaning the University of Michigan’s survey is far more downbeat on the economy than the Conference Board’s measure. I call this the consumer confidence gap, and it’s likely a reflection of the fact that the job market is very good right now (hence the high Conference Board reading), but gas prices and consumer inflation are also running extremely hot (hence the low U-Michigan reading).
One could also argue that this might be a sign that we are late in the economic cycle. And maybe a recession is right around the corner?
That’s possible. Very low readings from this indicator preceded the last handful of economic recessions. But it could also just be a sign of the times and a reflection of the strange post-pandemic economic world in which we currently find ourselves.
Either way, it’s a sign that consumers have mixed feelings about the economy right now. This can translate into uncertainty in the financial markets. And as they say, the stock market doesn’t like uncertainty.
This is intended for informational purposes only and should not be used as the primary basis for an investment decision. Consult an advisor for your personal situation.
Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
Past performance does not guarantee future results.