·
The University of Michigan's mid-August reading of consumer sentiment
ticked up 0.8% from July to 61.7. The gain followed the 8.5% increase in
July and the level about matched Consensus expectations for a reading of
62.0. The latest level of sentiment was the highest since March.
· During the last ten years there has been a 47% correlation between the level of sentiment and the three month change in real consumer spending.
· The expectations component of overall sentiment led the August improvement with a 6.2% rise after the 8.7% increase during July. Expectations for business conditions during the next year rose again as did expectations for conditions during the next five years. They made up nearly all of a sharp July decline. The expected change in personal finances fell modestly after a strong July increase.
· The current conditions
index was weak and fell 5.2%. That reversed most of the improvement
during July. The decline was due to a sharp decline in the index of
whether now is a good time to buy large household goods. It reversed the
strength in the July reading. The view of current personal finances also
fell (-31.1% y/y) early this month.
· The opinion of government policy, which apparently influences economic expectations, stabilized after a sharp decline in July. Only seven percent of respondents thought that a good job was being done.
· The mean expected rate of inflation during the next twelve months fell further to 5.5%. During the next five years, however, the expected inflation rate rose to 3.8% .
· The University of Michigan survey is not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver's USECON database, with details in the proprietary UMSCA database.
· How Much Have U.S. House Prices Fallen? from the Federal Reserve Bank of St. Louis is available here.