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Economy in Brief

Depressed U.S. Consumer Sentiment Fell Further
by Tom Moeller October 14, 2005

The preliminary October reading of consumer sentiment at 75.4 from the University of Michigan slipped 2.0% from September to the lowest level since 1992 and contrasted to Consensus expectations for improvement to 80.0.

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.

The current conditions index fell 2.4% m/m (-8.0% y/y) as sentiment regarding buying conditions for large household goods fell 4.6% (-8.9% y/y) but the read of personal finances improved 1.0% m/m (-7.1% y/y).

Consumer expectations slipped 1.4% after two months of double digit decline. Expected personal finances fell 3.5% (-12.6% y/y) but expected business conditions during the next 12 months improved a slight 3.2% (-43.4% y/y).

The mean expected inflation rate for the next twelve months was about stable at 5.4% but still up from 3.4% during all of last year.

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 October (Prelim.) Sept Y/Y 2004 2003 2002
Consumer Sentiment 75.4 76.9 -17.8% 95.2 87.6 89.6
   Current Conditions 95.7 98.1 -8.0% 105.6 97.2 97.5
   Consumer Expectations 62.4 63.3 -25.5% 88.5 81.4 84.6
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