Tuesday, July 16, 2024
Home Economic Trends Confidence, News and Sentiments in May

Confidence, News and Sentiments in May

by xyonent
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Confidence Newssentiment3.png

While the (final) sentiment measured in the University of Michigan survey is surprisingly pessimistic given what is observable, the decline needs to be put into context.

Figure 1: The University of Michigan Consumer Sentiment Index (blue, left scale), the Conference Board Consumer Sentiment Index (tan, left scale), and the Gallup Economic Confidence Index (light green, left scale) have all been normalized by scaling down by one standard deviation (for the sample period shown). Shapiro, Sudoff, and Wilson (2020) Daily News Sentiment Index (black, right scale). Gallup’s May observations are as of April 30th, etc. May News Index observations are through May 19th, 2024. NBER-defined recession peak-trough dates are in grey. Sources: University of Michigan (via FRED), Conference Board (via Investing.com), Gallup, San Francisco Federal ReserveNBER, and author’s calculations.

It is interesting to consider who is responsible for this pessimism. In the Michigan survey, which has a party breakdown, we can conclude that Republicans are much more pessimistic than Democrats and Independents compared to mid-2016. It is hard to say why they are so pessimistic. It is hard to associate it with “the news” as reflected in the San Francisco Fed’s News Sentiment Index.

This entry is by Menzie Chin.

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