Save Gap Between Two Consumer Confidence Indices
The main distinction between the University of Michigan Consumer Sentiment Survey and the US Consumer Confidence Questionnaire is that the former focuses on how consumers feel about the consumption of "durable goods”, while the latter is closely related to “general consumption” and “employment.”
When the gap (UMCSENT - USCCI) widens, it more often than not indicates that Fed is expected to raise interest rates due to better economic outlook. Heightened pressure on the borrowers will lead to reduction in consumption of durable goods. UM's consumer sentiment decreases first, while consumer confidence remains high, as the labor market, general consumption, and the stock market are still strong.
After several rate hikes, durable goods consumptions continue to decline. Companies begin to reduce investment and personnel costs, causing the labor market and consuming power in the private sector to stagnate. When consumers are conservative, the gap between the two consumer sentiment narrows down, and the stock market faces downward pressure.
Dow Jones Industrial Average (L)2021-12-0334,579.55
UMCSENT - USCCI (R)0.00