· 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.

· The reading of current economic conditions fell 1.2% but the current read of personal finances improved 0.8% (+15.5% y/y) as opposed to the a slight decline reported earlier. Perceived buying conditions for large household goods fell further than initially indicated (-0.6% y/y.

· Expectations for the economy were unchanged from the preliminary reading and fell 1.9% after the prior month's 8.4% m/m surge.

· Expected inflation during the next year fell to 3.3%, a bit lower than the earlier read and the lowest since early 2005. Since 1980 there has been an inverse 63% correlation between the level of sentiment and expected inflation during the next year. The five to ten year expected rate of inflation also fell m/m to 3.3%.

· Consumers' opinion about gov't economic policy improved even more than initially indicated, by 5.7% (10.8% y/y).

· 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

2003

Consumer Sentiment

12.9%

95.2

87.6

   Current Conditions

5.8%

105.6

97.2

   Expectations

19.5%

88.5

81.4