(This post was co-authored by Bill McInturff and Julia Sprague)
Public Opinion Strategies has been fascinated by the Michigan Consumer Sentiment Index (MCSI) for some time now. The MCSI is a monthly survey, with data available by month since 1978 and by quarter from 1952-1977, which gauges confidence among U.S. consumers.
Given the current recession and the big question of “how long will this last?” we examined past consumer sentiment downturns to see how long historically it takes before public confidence recovers.
Since 1952 when the MCSI began, there have been four periods where consumer sentiment dropped below 65: February 1974, July 1979, October 1990, and April 2008. We looked at the number of months it took after dipping below 65 before the Index climbed above 85 again.
In February 1974, it took 30 months for consumer sentiment to reach over 85. After July 1979, it took 45 months. After October 1990, it took 25 months total.* We are currently on month 11 since in dropped below 65 for the first time in April 2008.
The data is clear: it takes a LONG time. History suggests a consumer sentiment rebound is at least a two to four year process.
*The Index briefly rose above 85 in March 1991 after winning the Gulf War and then dipped back below 85 until November 1992.