Commentaries and explanations of methodology

Methodology for the calculation of consumer indices

The Index of Consumer Sentiment (ICS) is a macroeconomic indicator (the parameters of which were defined in 1952 at University of Michigan in the USA1), calculated on the basis of data collected from largescale sociological surveys, with an aim to explaining and making short-term predictions of consumer behaviour. The ICS is derived from five basic questions; these reflect households’ estimates and expectations regarding personal wealth, the country’s economic development and consumer market standing.

  1. How has the financial situation of your family changed in the past 12 months? (Possible answers: 1. improved; 2. remains unchanged; 3. worsened; 4. no answer.)
  2. How do you anticipate the financial situation of your family to change in the next 12 months? (Possible answers: 1. improve; 2. remain unchanged; 3. worsen; 4. no answer.)
  3. In terms of the economic conditions of the country as a whole, do you think the next 12 months will be good or bad for the country’s economy? (Possible answers: 1. good; 2. good, but not in all respects; 3. not good, but not bad; 4. bad, but not in all respects; 5. bad; 6. no answer.)
  4. Looking forward, do you think the next 5 years will be good or bad for the country’s economy? (Possible answers: 1. good; 2. not good, but not bad; 3. bad; 4. no answer.)
  5. In general, would you consider it to be a good or bad time to buy durables for the home (such as furniture, refrigerator, household appliances, television)? (Possible answers: 1. good; 2. not good, but not bad; 3. bad; 4. no answer.)

The index is calculated as the difference between the proportion of positive answers and the proportion of negative answers, plus 100.

The ICS has two sub-aggregates: the Index of Current Economic Conditions (ICC) and the Index of Consumer Expectations (ICE).

ICC = the average value of two individual indices: 1) change in personal financial situation in the last 12 months and 2) estimates of the current consumer market standing.

ICE = the average value of three individual indices: 1) anticipation of personal financial situation in the next 12 months, 2) anticipation of the country’s economic growth in the next 12 months and 3) anticipation of the country’s economic growth in the next 5 years.

In the USA the indicator values are published twice monthly: on the second Friday of each month preliminary data is published, then corrected values are published on the last Friday. The indicator is calculated on the basis of a telephone survey of 500 people. The level of inflation, movement in rates on securities, employment and economic conditions in general are all considered to have a significant influence on the ICS. The data received provides information about the willingness of households to spend their money. On the basis of the given index it is possible to judge consumer activity and expectations, as well as their evaluation of current and future living conditions, including inflation. As a rule, growth in this index is an indication of relatively good prospects in the economy, enabling increase in the value of the dollar on FX markets, while a fall in this index tends to indicate a likelihood of economic downtern.

The publication of this indicator has significant influence on both private and institutional investors. Growth in the ICS that surpasses the expectations of analysts usually prompts investors to make more active and risky investments, and therefore causes growth in stock exchange indices. Aside from this, the given indicator is used by the federal reserve banks of the USA in determining approaches to monetary policy and inflation risks assessment.

There is basis for thinking that in terms of the Russian market the movement of the ICS could also be a relatively reliable instrument for forecasting the future consumer and financial behaviour of households and, eventually, for forecasting inflation. In December 2012, the Public Opinion Foundation carried out an analysis, entitled ‘Secondary Analysis of Statistics and Sociological Data about the Perception of Inflation’, it showed that in the long-term interval from 1998 to 2008 all five individual components of the ICS had a statistically significant and negative correlation with Rosstat’s inflation index, as well as with the index of anticipated inflation.

1 Official information from University of Michigan (USA): For details of the theoretical foundations of the ICS, the methodology used in building it and the history of its usage go to

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