Animal spirits measurement

Posted by: Paul Donovan

21 Mar 2025 2 min read

Weekly Updates

Consumer sentiment was important in supporting advanced economies鈥� strength over the past four years. Low fear of unemployment meant that rising real incomes were directed to spending, rather than saved as an insurance against an uncertain future.
This makes 鈥渁nimal spirits鈥� an important part of the near-term economic outlook. How people feel might change how people behave. As US policy has become more erratic, the combination of feelings and uncertainty about the future has potential power.
How can animal spirits be measured? For years, survey evidence was used. But survey response rates are dwindling. Measuring animal spirits of the peculiar minority who actually bother to reply to surveys risks generating weird results. Increasingly partisan divisions means surveys are more likely to capture the bestial snarls of competing political packs than genuine animal spirits that motivate economic behavior.
Three measures still offer insight. Shifts in partisan consumer sentiment against the party line鈥攊f US Republicans start reporting pessimism or Democrats optimism, that is an important signal. Media and social media trends can indicate changes in the narrative鈥攁n increase in web searches for 鈥渞ecession鈥� for example. Credit card data about consumer spending trends on very discretionary items鈥攔estaurant meals, for instance鈥攃an offer an early signal of shifting spirits.