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Economy in Brief

U.S. Consumer Sentiment Remained Depressed
by Tom Moeller September 30, 2005

The University of Michigan indicated that its final reading of consumer sentiment during September was unchanged from the preliminary indication of a 13.7% m/m decline to 76.9, the lowest level in over ten years. The September decline followed a 7.7% drop in August and Consensus expectations had been for improvement to 78.0 in August.

During the last ten years there has been a 78% correlation between the level of consumer sentiment and the y/y change in real consumer spending.

Consumer expectations were depressed 17.7% as the index of expected business conditions during the next 12 months cratered 39.2% (-46.6% y/y). Unemployment was expected to rise but interest rates were expected to decline.

The mean expected inflation rate for the next twelve months rose to 5.5% from 3.7% in August and that helped erode expectations for real income by 1.3% (-7.3% y/y).

The current conditions index fell 9.3% m/m, roughly double the decline in August. Sentiment regarding personal finances tumbled 12.0% m/m and was at its worst level in over two years.

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 Sept (Final) Sept (Prelim.) August Y/Y 2004 2003 2002
Consumer Sentiment 76.9 76.9 89.1 -18.4% 95.2 87.6 89.6
   Current Conditions 98.1 97.7 108.2 -5.4% 105.6 97.2 97.5
   Consumer Expectations 63.3 63.6 76.9 -28.1% 88.5 81.4 84.6
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