Variations in Consumer Sentiment across Demographic Groups

Consumer sentiment is one of the many macroeconomic indicators tracked by policymakers. Consumer sentiment— as measured by indexes such as the Index of Consumer Sentiment (ICS) and the Consumer Confidence Index (CCI)—is seen as a barometer of economic activity, one that is a reliable indicator of the way people plan to spend their money. Consumer sentiment is important because it affects household spending. Nationally, household spending on final goods and services (retail sales) represents about 65 percent of all expenditures for final goods and services, the nation’s gross domestic product (GDP). Since private consumption expenditure accounts for such a large proportion of GDP, consumer sentiment can signal changes in the direction of the economy. Numerous studies have assessed the extent to which consumer sentiment is related to fluctuations in GDP, the stock market and other outcomes.