Does the Confidence Index Say We’re in a Recession?

Title of last Conference Board post on the index reads: “Expectations Index Declined for the Second Straight Month, Sinking Back Below Recession Threshold”. Here’s a picture of this index, compared against the University of Michigan Consumer Sentiment index.

Figure 1: University of Michigan Consumer Sentiment index (blue), and Conference Board Consumer Confidence index (tan). NBER defined peak-to-trough recession dates shaded gray. Source: U.Michigan via FRED, Confidence Board via TradingEconomics, and NBER.

A regression using the Michigan index doesn’t predict NBER defined recession dates well, so I rely on the Conference Board measure. The six month change, lagged one month, has a pseudo-R2 of 0.31 over the 1986-2023 period (assuming no recession has occurred as of 2023M10). The prediction indicates no recession as of October 2023.

Figure 2: Recession probabilities from probit regression of NBER recession dates on one month lagged 6 month change in Consumer Confidence index. NBER defined peak-to-trough recession dates shaded gray. Source: NBER, and author’s calculations. 

I’m exploiting a correlation between an index of sentiment and recession dates, nothing more, nothing less here. A low confidence index is not the same as a recession (a recession is a broad sustained decrease in economic activity, which might result in a reduction in sentiment, or be presaged by a reduction in sentiment, but is not in itself the same thing).


12 thoughts on “Does the Confidence Index Say We’re in a Recession?

  1. Macroduck

    Off topic, the ghoulish things we say to justify war –

    We have a new metric to justify atrocities against non-combatants – “the 9/11”. As in “How many 9/11s is that?” It’s a fraction, relating deaths from some violent action to population size. So, assuming I’ve done the math right (?), here’s a little run-down:

    9/11 deaths as a share of U.S. population, 0.001%. So 0.001% of a population is one 9/11.

    Using that figure, let’s see just how barbaric this justification for mass murder is.


    Palestinian deaths from Israeli attacks 2008-2020 as a share of Gaza population, 0.27%. Palestinians suffered 270 9/11s in that twelve year period.

    Palestinian deaths in the recent action as share of Gaza population, 0.27%, the same as in all of 2008-2020, another 270 9/11s.

    Israel deaths from Hamas, Hezbollah, suicide bomber etc attacks as a share of population 2008-2020, 0.0027%. That’s 2.7 9/11s.

    Israeli deaths in recent action as share of population 0.015%. This is the (in)famous fifteen 9/11s.


    If suffering one “9/11” is justification for crying “havoc” and slaughtering babies and parenrs and teachers and farmers, then Palestinians are ahead of the game at 540 to 18.

    Something on the order of 450,000 Iraqis and Afghanistanis have died in war as the result of 9/11. If 450,000 deaths are the justifiable retribution for one 9/11, then Hamas has every right to wipe out Israel 26 times over.

    Feel free to cut that number in half, since the U.S. is not directly responsible for all of those 450,000 deaths. If 225,000 is the justifiable retribution for one 9/11, then Hamas would still have every right to wipe out Israel 13 times over. Hardly worth doing the math twice.

    Israel, having suffered eighteen 9/11s, would only be justified in wiping out Gaza’s population twice over.

    What stupidity.


    Source of 2008-2020 death counts:

    And yeah, I know the West Bank is included, but West Bank Palestinian deaths are very low relative to Gaza deaths.

    1. Not Trampis

      Can I add no-one should ever Hamas which is an evil morally depraved terrorist group with the Sate of Israel. It is or should a civvi9lised modern western country. It should have much higher values than Hamas.
      If only Jews read their Hebrew bible

  2. Macroduck

    Just a reminder, Michigan data show that partisanship has a far greater effect on consumer sentiment now than in the past. This amounts to regime change, making whatever relationship may have existed in the past between consumer sentiment and economic conditions unreliable today.

    We knew that already:

    But then, even if we trust consumer sentiment as a recession indicator, Menzie’s math says “no recession”.

    1. Macroduck

      Does an invasion of Gaza meet Powell Doctrine conditions?

      Is a vital national security interest threatened? Check.

      Do we have a clear attainable objective? Doesn’t seem so.

      Have the risks and costs been fully and frankly analyzed? No. Absolutely not

      Have all other non-violent policy means been fully exhausted? No. Absolutely not.

      Is there a plausible exit strategy to avoid endless entanglement? Yes. Just leave without solving anything. Like last time.

      Have the consequences of our action been fully considered? No. No. Not at all

      Is the action supported by the Israeli people? A majority, yes.

      Do we have genuine broad international support? Who are we kidding?

      Two out of eight. Great.

      1. pgl

        The Powell Doctrine is a worthy idea but Israel never exactly signed onto it alas. Come to think about – George W. Bush ignored it back in 2003. Not good.

  3. Ivan

    The problem with trying to use prior correlations to predict future outcomes is that unless you fully understand the mechanism creating the correlation you may miss out on the rare times when it brakes. Most of the times “this time is different” makes a wrong call but sometimes it really is different. So what is driving consumer sentiment this time and is that was drove their sentiment all those previous times? Your figure 1 point to an unusual big split between the Michigan and Conference board, what is driving that?

    1. Macroduck

      If memory serves, Michigan tends to hew more closely to financial market performance, the Conference Board to employment performance.

      Or vice versa? Pretty sure I have it right.

      1. baffling

        this has been a very bad week for trump. the dominos are beginning to fall. unfortunately, he still has significant sway with the party, as evidence by his pulling of the strings for the speaker position. but now people who have bowed down to his wishes to avoid his ire have a more complicated calculus. his issues in the courts, and especially in georgia, are making him much more vulnerable. the safety of siding with him, as to opposing him, is starting to diminish ever so slightly. many people are like emmer, only reluctantly supporting him. why? look at what he did to emmer, because emmer had the audacity to approve the biden victory. his retribution was vicious. but that fear only works if people believe he can get back into the white house. that is going to be a problem for a convicted felon in jail-which could happen in georgia. look for trump to pressure the georgia governor to pardon him if convicted. the federal charges will be taken care of if trump gets back to the white house. it looks like georgia will have significant say in how this plays out with trump. fani willis could become a hero to the republican party, if she continues her successful pursuit of trump. and remember, the target is trump, not giulliani.

        1. Ivan

          Trump may get convicted in Georgia before the election, but he will immediately appeal that conviction – so there is no way he would be in jail before the election. If he wins he would almost certainly get all criminal charges cleared out. The federal charges will be dropped by his AG and the Georgia charges by a pardon from the governor (arguing that you cannot put an elected President in jail). In NY he will almost certainly lose a lot of money, but he cannot get jail time for that one. The current trials and indictments will give him increased support from the MAGAites who just see anything coming out as part of a lying conspiracy and proof that the “enemy” deep/liberal state is fearing Trump. The question is what the trials will do to the vote of those who are really not sure, and how much it will fire up the committed partisans to go vote. My guess is that a continued focus on Trumps criminal behavior will swing most of the undecided away from him and also suppress voter participation from establishment GOP (who would like to see Trump loose and go away). But the election is 1 year away and lots of things can happen.

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