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Economy in Brief

U.S. Consumer Sentiment Down As Expectations Waned
by Tom Moeller April 15, 2005

The University of Michigan's preliminary reading of consumer sentiment in April fell 4.2%. The m/m decline was the largest since last May, was much deeper than Consensus expectations for a more moderate decline and pulled Sentiment to its lowest level in nearly two years.

Sentiment has fallen in each of the last four months and is off 14.5% from the January '04 peak. During the last ten years there has been a 75% (inverse) correlation between the level of consumer sentiment and the unemployment rate.

Consumer expectations fell a hard 4.6%. Down for the fourth straight month the figure is off 21.1% from the January '04 high. The expected change in real family income fell 12.2% to the lowest level since 1991. More unemployment was expected by the highest percentage since late 2003 and price inflation was expected to quicken.

The reading of current economic conditions fell 3.8% for the third consecutive monthly decline and the latest is off 5.1% from the 2004 peak. Fewer thought now was a good time for buying vehicles and fewer thought now was a good time for buying houses.

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 April Mar Y/Y 2004 2003 2002
Consumer Sentiment 88.7 92.6 -5.8% 95.2 87.6 89.6
   Current Conditions 103.9 108.0 -1.0% 105.6 97.2 97.5
   Consumer Expectations 79.0 82.8 -9.5% 88.5 81.4 84.6
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