While the (ultimate) sentiment measured by the U-M survey remains surprisingly pessimistic based on what's been observed, this decline needs to be put into context.
figure 1: University of Michigan consumer confidence (blue, left scale), Conference Board consumer confidence (tan, left scale), Gallup Economic Sentiment (light green, left scale), all devalued and by standard deviation Normalized (for the sample period shown); and Shapiro, Sudhoff, and Wilson (2020) Daily News Sentiment Index (black, right scale). Gallup's May observation is the observation on April 30, and so on. NBER-defined recession peak-to-trough dates are in gray. Source: U.Mich (from FRED), The Conference Board (from Investing.com), Gallup, SF FedNBER, and author's calculations.
It's interesting to think about who is responsible for this pessimism. For the Michigan survey, we categorized it by party, We can conclude that, relative to the 2016 midterms, Republicans remain more pessimistic than Democrats and independents. It's hard to say why they are so pessimistic. It's hard to relate it to “news” As reflected in the SF Fed's News Sentiment Index.
