· During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending and during those ten years sentiment has a 68% correlation with the change in nonfarm payrolls.

· Diminished consumer expectations for the economy dragged the December figure down with a 5.5% decline after a 1.9% November shortfall. Business conditions during the next twelve months led that decline with a 13.4% (-6.7% y/y) drop while long term expected business conditions also fell as did expected personal finances.

· The reading of current economic conditions actually rose 2.1% and reversed the 1.2% November drop. Perceived buying conditions for large household goods led that m/m increase (-1.2% y/y) but the sense of current personal finances fell (-0.8% y/y).

· Expected inflation during the next year increased to 3.5% and for the next five years expected inflation ticked up to 3.6%. Since 1980 there has been an inverse 63% correlation between the level of sentiment and expected inflation during the next year.

· Consumers' opinion about gov't economic policy sagged miserably to an index reading of 86 and reversed all of November's increase.

· The University of Michigan survey is not seasonally adjusted. The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

University of Michigan

Y/Y

2004

Consumer Sentiment

-1.4%

95.2

   Current Conditions

-0.8%

105.6

   Expectations

-2.0%

88.5