The US economy was poised on the edge of a recession even before 11 September. Following the attacks, the immediate financial shocks were contained. But, despite plans by the Bush government to provide a large boost to the economy, because of massive overinvestment and overborrowing, a serious...

We study the information content of the University of Michigan's Index of Consumer Sentiment as well as its five components. Using household data from the Surveys of Consumers, we identify the main determinants of these indicators and document their varying role over the business cycle. Our...