What are consumer sentiment indicators a measure of?

Abstract

This paper discusses the status of consumer sentiment indicators in macroeconomic forecasting, and argues that economists have been ambivalent between several different interpretations of the cognitive ontology of consumer sentiment: deflationism (motivated by an emphasis on economic fundamentals or rational expectations), doxastic realism (motivated by the ideas of privileged epistemic access and wisdom of the masses), and affective realism (motivated by the idea of animal spirits and willingness to spend as causal forces for the economy). These different psychological interpretations of consumer sentiment are argued to have implications for economic policy and macroeconomic forecasting owing to their contrasting assumptions about the mechanisms by which consumers acquire their views about the economy, and the ways in which their attitudes influence private consumption.