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Economy in Brief

U.S. Consumer Sentiment Slipped Further
by Tom Moeller February 18, 2005

The preliminary February index of consumer sentiment from the University of Michigan fell to 94.2 versus Consensus expectations for stability at 95.5. During the last ten years there has been a 74% correlation between the level of consumer sentiment and the y/y change in real PCE.

The decline was due to a lower reading of consumer expectations which fell 2.7% m/m on top of a 5.7% decline in January. The decline in expectations was to the lowest level since last May and due to reduced expectations for business conditions & real income growth.

The reading of current conditions was stable. Sentiment regarding personal finances vs. a year ago jumped. During the last ten years there has been an 81% correlation between the current conditions index and y/y growth in payroll employment. Buying conditions for large household goods improved on strong gains in 4Q04.

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 Feb Jan Y/Y 2004 2003 2002
Consumer Sentiment 94.2 95.5 -0.2% 95.2 87.6 89.6
   Current Conditions 110.9 110.9 7.0% 105.6 97.2 97.5
   Consumer Expectations 83.4 85.7 -5.8% 88.5 81.4 84.6
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