University of Michigan Consumer Sentiment Signal

Signal Summary:

• U.S. consumer sentiment is currently in a Bearish regime, with the UMCSENT index at 52.9 as of 2025-12-31 (1). This signifies a contraction in consumer optimism.
• Conviction Band: High, Interpretation Confidence: High Confidence, Internal Conflict Flag: No.

Key Dynamics:

• The primary driver is the robust z-score of the sentiment level at -0.98, which is below the -0.5 threshold for Bearish conditions (1).
• Momentum is strongly negative, with year-over-year sentiment declining by 28.51% and 3-month momentum down by 3.99% (1).
• The signal shows clear, consistent deterioration across its level and momentum components.
• Conditional Invalidation: A rebound in the sentiment's level z-score above -0.5 or a sustained positive shift in both YoY and 3-month momentum would invalidate this Bearish interpretation (1).

Scenario Balance:

• Base Case dominant: Continued weak consumer sentiment due to persistent low absolute levels and negative momentum (1).
• Upside secondary: A notable and sustained improvement in short-term (3-month) sentiment momentum.
• Downside residual: Further erosion in the sentiment level and acceleration of negative momentum.

Time Horizon & Aggregation:

• Time Horizon: Cyclical (months). Rationale: The signal uses monthly data, including 3-month and year-over-year changes, suitable for capturing medium-term cyclical shifts in demand (1).
• Aggregation Weight Hint: High. Justification: As a core demand indicator, consumer sentiment holds significant weight in broader macro composites (1).

Macro Relevance:

• This signal primarily informs the macro dimensions of demand and sentiment (1).
• Its current state suggests a late-cycle or potentially contracting phase for household consumption.
• It typically interacts with labor market (2), inflation (3), and credit conditions (4) signals to form a comprehensive macro regime view (1).

Data & References:

• University of Michigan Consumer Sentiment (UMCSENT) from FRED, latest observation 2025-12-31 (1).
• The UMCSENT level (52.9), its robust Level_z (-0.980061), YoY_pct (-28.51%), and 3M_pct (-3.99%) for 2025-12-31 are most influential (1).
• Additional public datasets that would improve depth or reliability include the Employment Composition Signal (5) and Wage Growth and Inflation Signal (6).