Consumer Sentiment: Michigan vs Conference Board

Key Takeaways

• Michigan (since 1946, ~1,000 households) and Conference Board (since 1967, ~5,000 households) use different base years and scales, a Michigan 70 is not directly comparable to a CB 100.
• Michigan emphasizes household finances and inflation expectations; Conference Board leans on labor market perceptions (jobs plentiful vs. hard to get).
• The Expectations sub-index is the more cyclical component; when it falls faster than Current Conditions, households are pricing in a slowdown before seeing it in paychecks.
• Sentiment tracks news cycles and gas prices as much as future spending, treat it as one input, not a standalone forecast.

What It Is

Two surveys dominate the US reporting cycle. The University of Michigan Survey of Consumers, running since 1946, polls roughly 1,000 households a month on personal finances, business conditions, and buying intentions. The Conference Board Consumer Confidence Index, running since 1967, surveys about 5,000 households, leans more heavily on labor-market perceptions, and is benchmarked so that 1985 equals 100.

Both indices split the headline into two sub-components: a present-conditions reading and a forward expectations reading. The Conference Board weights current conditions at 40 percent and expectations at 60 percent. The Michigan index uses five questions that feed both a Current Conditions index and an Expectations index.

The Intuition

Hard data tells you what households did last month. Sentiment tells you how they felt about doing it. The idea is that mood tends to lead discretionary spending: people who feel insecure postpone cars, appliances, and vacations, and people who feel confident pull those purchases forward.

In practice, the relationship is noisier than the theory suggests. Sentiment tracks news cycles, gas prices, and partisan framing as much as it tracks future spending. Treat these indices as one input among many, not as a standalone forecast.

How It Works

Both surveys build their indices from the same basic recipe. For each question, they compute a relative score as the percentage of favorable replies minus the percentage of unfavorable replies, plus 100. These raw scores are combined, normalized to a base period, and published on a standardized scale.

relative score = (% favorable) - (% unfavorable) + 100
headline index = average of component scores, scaled to base year = 100

Michigan uses Q1 1966 as its base. The Conference Board uses 1985. Because the base years differ, you cannot compare the two levels directly. A Michigan reading of 70 and a Conference Board reading of 100 can describe the same underlying mood.

The two surveys diverge in what they emphasize. Michigan questions focus on household finances, expected inflation, and buying conditions for big-ticket items. Conference Board questions focus more on the labor market, asking whether jobs are plentiful, hard to get, or somewhere in between. When rate hikes bite borrowing-sensitive households before they dent hiring, Michigan often drops first.

Worked Example

Suppose a month's Michigan survey returns 45 percent favorable answers on personal finances, 35 percent unfavorable, and 20 percent neutral. The relative score is 45 minus 35 plus 100, which equals 110. Repeat for each of the five core questions, average the results, and scale to the 1966 base.

Now imagine the same month produces a Conference Board reading that rises 3 points while Michigan falls 4 points. That 7-point gap is not a contradiction. It usually means Present Situation answers on jobs are still firm while expectations about prices and personal finances are weakening. Both can be true at once, and the gap itself is the signal.

Common Mistakes

1. Conflating the two indices. They share a name in the popular press but measure different things on different scales. A Michigan level is not a Conference Board level. Compare each series to its own history.

2. Treating a single monthly move as signal. Sample sizes of 1,000 to 5,000 households produce a standard error large enough that 2 to 4 point swings are often statistical noise. Look at 3-month averages and direction of change before you act on any monthly print.

3. Expecting sentiment to lead markets. Sentiment is typically coincident or lagging. Households feel bad after layoffs start, and feel good after wages rise. Equity markets often turn before households do, not after.

4. Dismissing sentiment when prices rally. Partisan framing can understate or overstate how people feel, depending on who is in the White House. That does not make the readings useless. It means the level matters less than the change, and the gap between Michigan and the Conference Board often tells you more than either one alone.

5. Ignoring the sub-indices. The Expectations component has historically been the more cyclical piece. When Expectations falls faster than Current Conditions, households are pricing in a slowdown before they see it in their paycheck.

Frequently Asked Questions

What is the difference between Michigan consumer sentiment and the Conference Board Consumer Confidence Index? Both survey U.S. households monthly but measure different things on different scales. Michigan polls ~1,000 households and emphasizes personal finances, buying conditions for big-ticket items, and inflation expectations. The Conference Board surveys ~5,000 and leans on labor market perceptions, whether jobs are plentiful or hard to get. You cannot compare their levels directly; compare each to its own history.

Does consumer sentiment predict stock market moves? No, sentiment is typically coincident or lagging, not leading. Households feel bad after layoffs start and good after wages rise. Equity markets usually turn before household sentiment does. Sentiment is a useful cross-check on whether consumer spending is likely to hold up, not a timing tool for equity positioning.

Why do Michigan and Conference Board sometimes move in opposite directions? Because they measure different things. When rate hikes squeeze borrowing-sensitive households before they visibly dent hiring, Michigan's finance-focused questions often fall first while Conference Board's labor-focused questions hold up. That divergence is itself the signal, financial conditions are tightening while labor demand is still firm.

How is the sentiment index number calculated? Each survey question produces a relative score: percentage of favorable responses minus unfavorable responses, plus 100. These scores are combined and normalized to a base period (1966 for Michigan, 1985 for Conference Board). A reading below 100 relative to base does not mean sentiment is negative in absolute terms, it just means sentiment is below its long-run average level.

Should investors act on single monthly sentiment prints? Rarely. With sample sizes of 1,000–5,000 households, a 2–4 point swing is often statistical noise within the standard error. Three-month averages and the gap between Current Conditions and Expectations sub-indices provide more actionable signal than the headline month-over-month change alone.

Sources

1. University of Michigan. "Surveys of Consumers." https://www.sca.isr.umich.edu/
2. University of Michigan. "Surveys of Consumers: Index Calculations." https://data.sca.isr.umich.edu/fetchdoc.php?docid=24770
3. The Conference Board. "US Consumer Confidence." https://www.conference-board.org/topics/consumer-confidence/
4. The Conference Board. "Consumer Confidence Survey Technical Note (May 2021)." https://www.conference-board.org/pdf_free/press/TCB_CCS_TechNote_May2021.pdf
5. Federal Reserve Bank of St. Louis. "University of Michigan: Consumer Sentiment (UMCSENT)." https://fred.stlouisfed.org/series/UMCSENT

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.