Surfing the Index of Consumer Sentiment: Identifying Statistically Significant Monthly and Yearly Changes

Paul R. Yarnold

Optimal Data Analysis, LLC

Published monthly by the Survey Research Center of the University of Michigan, the Index of Consumer Sentiment (ICS) is widely followed, and one of its factors (the Index of Consumer Expectations) is used in the Leading Indicator Composite Index published by the US Department of Commerce, Bureau of Economic Analysis. Using household telephone interviews the ICS provides an empirical measure of near-term consumer attitudes on business climate, and personal finance and spending. Variation in ICS influences price and volume in currency, bond, and equity markets in the US and in markets globally. The practice of releasing monthly ICS values five minutes to two seconds earlier for elite customers via high-speed communication channels was recently suspended because it provided unfair trading advantages. This article investigates the trajectory of the ICS over the most recent three-years, evaluating the statistical significance of month-over-month and year-over-year changes. These analyses define a longitudinal series of class variables which may be modeled temporally using time-lagged single- (UniODA) and multiple- (CTA) attribute ODA methods.

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