Given the scholarly and popular prominence of the concept of consumer confidence, it is striking that there are no examinations of the quality of the most commonly used measure of the concept—the University of Michigan’s Index of Consumer Sentiment (ICS). In this study, we assess the usefulness of consumer sentiment as a construct and a measure (or measures). We also identify the best way to consider its role in consumer behavior. This brings us to a consideration of fundamental questions about the reliability and validity of consumer sentiment measures. Our purpose is to provide evidence on this score. Our analyses suggest that the ICS is a reliable indicator of consumer confidence. The measure exhibits substantial face validity, but the index itself (though not its components) falls short in terms of its predictive validity with regard to spending on durable goods.
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