Economists and market-watchers are divided over whether the University’s method of releasing its monthly Surveys of Consumers, which gauge consumer confidence, gives an unfair advantage to those that are paying subscribers.
The surveys, which are conducted by the Institute for Social Research, are prominent and closely watched by experts because one part of the surveys – the index of consumer expectations – is an official component of the Index of Leading Economic Indicators, published by the U.S. Department of Commerce.
Preliminary results are released on the second Friday of each month, followed by final results on the fourth Friday. On both days, the University holds a conference call with the sponsors, who pay $4,650 per year to fund the research before releasing results to the public. The conference call takes place around 10 a.m., and is followed by a news release to the media a couple hours later.
Mercer Bullard, former assistant chief counsel at the Securities and Exchange Commission, said this information-releasing policy is “inappropriate” because “they are selling the information to people that is publicly available minutes after the sell.”
But ISR spokeswoman Diane Swanbrow defended the release method, and said sponsors release the data to the public long before the time the news media receive the official release from the University.
Director of Surveys Richard Curtin “does ask the sponsors of the research to sign a statement saying that they will not release the information ahead of time to anyone. As a matter of fact, it’s routinely breached by sponsors who do leak this information to the news media,” she said.
As a result, “within minutes the surveys’ findings are appearing on the websites of CNN, MSNBC and every other major news organizations,” she added. But Bullard said sponsors are willing to pay a high premium to get the information a few minutes before everyone else because the data has an important impact on the markets.
“The only conceivable value provided to these people is their ability to front-run the market with that information,” he said.
The monthly release of the surveys, which include the consumer sentiment index and the index of consumer expectations, always draw the national spotlight. According to experts, two-thirds of the U.S. economy is fueled by consumer spending and consumer sentiment and consumer expectations have the potential to either buoy or dent the financial markets.
But one of the subscribers, Jim O’Sullivan, the U.S. economist of investment bank UBS Warburg, said he was skeptical about how large an impact the surveys have on markets when there are so many other factors influencing them daily. “There are a lot of numbers out there that the government provides, it’s just an extra one,” he said.
O’Sullivan said receiving the data early is not the sole reason for subscribing to the surveys; having access to the complete set of historical data that the surveys produce is also useful for conducting further analysis.
Critics said the University should not limit the information to its subscribers.
“I am surprised that the University of Michigan would opt to release such an important number to a selected group of people earlier,” said Randall Poe, the communications director of the Conference Board, a non-profit organization that conducts the Consumer Confidence Index, similar to the University’s surveys.
But O’Sullivan said the practice is the only way for the University to fund the research.
“If it didn’t charge people to get it early, then why would anyone pay; if nobody paid, how would it operates and it wouldn’t exist,” he said.
Roger Farmer, an economics professor at the University of California at Los Angeles, said the University of Michigan is not alone in giving special privileges to sponsors.
“I don’t think it is unusual. It’s just like the forecasting project at the business school here, which only allows the sponsors to receive the information from the university,” he said.
“We are absolutely not making a profit. The surveys basically receive just enough funding from the sponsors to pay for the cost of conducting the research,” Swanbrow said. “We have no plan of changing the way the surveys are funded or changing the way it is released.”