Question

Why does the Conference Board’s confidence index move more than the University of Michigan’s consumer sentiment Index? By how much on the average?

Answer 1

The method undertaken by the Conference Board is different from that of the University of Michigan’s, to calculate the indexes. Owing to such methodological distinctions, the similar shifts in the responses by the consumers, shall end up producing different figures by both these entities. Conference Board’s confidence index demonstrates larger moves than that in case of University of Michigan’s.

On an average, with every one-point move in the index of University of Michigan, there shall be a witnessing of two-point move in that of the Conference Board’s confidence index.

This is so because of the factors that goes into the calculation of such indexes under both these methods. Moreover, the survey methodology is different as well in both the cases. In addition, it is difficult to even compare the underlying factors that form part of the methods undertaken by Conference Board and University of Michigan. Such factors shall include base and index level constructions, etc. Also, when the comparison is not on the standardized basis rather is taken on the absolute terms, the differences in the calculation of moves, is evident. The volatility is less witnessed in case of Conference Board than in case of University of Michigan’s consumer sentiment index.