Nowcasting the Surveys of Consumers
Key Takeaways
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Morning Consult’s Index of Consumer Sentiment (ICS) can be used to track and predict the University of Michigan’s sentiment index, derived from its Surveys of Consumers, in real time.
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The model described here produces adailyestimate of the University of Michigan’smonthlyConsumer Sentiment Index and accurately nowcasts both the preliminary and final releases for that index.
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For users of the University of Michigan index, Morning Consult’s new daily tracker and nowcast provide an unparalleled, real-time read on the health of the U.S. consumer, allowing us to accurately predict the index before its release.
This memo is a summary of thefull reportNowcasting the Surveys of Consumers: Using Morning Consult’s Daily Economic Intelligence to Track and Predict the University of Michigan’s Consumer Sentiment Index.
In our connected, ever-changing and fast-paced world, amonthlymeasure of consumer confidence often isn’t enough for companies to make timely decisions about their business operations. To fill this gap in coverage, we at Morning Consult ask on adailybasis the same five questions that underpin theUniversity of Michigan’s Consumer Sentiment Index. Furthermore, we do so at an unprecedented scale, conducting online surveys of roughly 6,000 U.S. adults daily, nearly 10 times the amount contacted by phone each month for the University of Michigan’s Surveys of Consumers.
Though strongly correlated, the two indexes aren’t identical
As the figure below demonstrates, Morning Consult’s daily read on consumer confidence, ourIndex of Consumer Sentiment, closely tracks the University of Michigan’s Consumer Sentiment Index on a monthly basis (correlation coefficient = 0.97), but the two are not identical. For this reason, and to aid users of the University of Michigan index, we built a statistical model that translates their index to ours daily, with the former able to predict the latter.
We came up with a new daily tracker for the University of Michigan index …
统计模型使用的历史测量员eys of Consumers preliminary and final releases, Morning Consult’s daily ICS, the monthlyIBD/TIPP Personal Finances Index, the dailyS&P 500index andAAA retail gas pricesto generate the daily estimate of the University of Michigan index shown in the figure below. When averaged over the appropriate monthly survey windows, the daily estimate exactly matches the published data from the University of Michigan. And when that data is not yet available, our model can be used to predict it.
… and provide a monthly nowcast for it on the Bloomberg terminal at ECOS
We use the model to “nowcast” the Surveys of Consumers and make these findings available the day before the consumer sentiment index’s release on theBloombergterminal at ECOS. Our own out-of-sample backtesting, shown below, suggests that these nowcasts would have outperformed consensusforecasts for the preliminary releases of the University of Michigan index from March 2020 to August 2022 by a statistically significant margin, as well as held their own relative to the final releases of the same consensus forecasts.
Conclusion
The model described here combines Morning Consult’s ICS with other high-frequency data sources to produce a daily tracker and monthly nowcast for the University of Michigan’s Consumer Sentiment Index. The nowcast consistently improves on consensus forecasts that are often relied upon as an alternative. For further information, download thefull report.
Scott Brave previously worked at Morning Consult in economic analysis.