Consumer Sentiment

Consumer sentiment is an economic indicator that measures the overall attitude, confidence, and outlook of households regarding the economy and their personal financial situations. It reflects how optimistic or pessimistic consumers feel about their income prospects, job security, inflation, and the broader economic environment. Since consumer spending makes up a significant portion of GDP in most economies, shifts in sentiment can signal future changes in economic activity.

This sentiment is typically measured through surveys, such as the University of Michigan Consumer Sentiment Index or the Conference Board Consumer Confidence Index in the U.S. These surveys ask individuals about their current financial conditions, expectations for the future, and their willingness to make major purchases like homes or cars. High consumer sentiment suggests that people are more likely to spend, invest, and take on debt, which supports economic growth. Low sentiment, on the other hand, can indicate caution and reduced spending, often preceding a slowdown or recession.

Economists and policymakers closely watch consumer sentiment because it acts as a leading indicator—often shifting before broader economic data like employment or retail sales. In financial markets, sudden changes in sentiment can influence stock prices, bond yields, and central bank policy expectations. However, because sentiment is subjective and influenced by news, social media, and political developments, it must be interpreted alongside other economic data for a complete picture.

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