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Economy in Brief

U.S. Consumer Sentiment Lifted Further By Drop in Oil Prices
by Tom Moeller November 23, 2005

The November reading of consumer sentiment from the University of Michigan rose 10.0% m/m to 81.6, adding a bit to the improvement through mid-month. Consensus expectations had been for a rise to 81.0.

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.

Improved expectations fostered the m/m rise. The index of Consumer expectations rose 10.1% as expected business conditions during the next year surged 22.1% while expectations for personal finances recovered all of the prior month's drop. The mean expected inflation rate for the next twelve months fell further to 4.1% from 5.5% expected in October & September.

The current conditions index held onto the improvement through mid-month and rose 9.9% versus October. The reading of personal finances rose 7.3% and reversed all of the October decline and the reading of buying conditions for large household goods jumped 12.9% to the highest level since August.

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.

Why Hasn't the Jump in Oil Prices Led to a Recession? from the Federal Reserve Bank of San Francisco is available here.

University of Michigan Nov (Final) Nov (Prelim) Oct Y/Y 2004 2003 2002
Consumer Sentiment 81.6 79.9 74.2 -12.1% 95.2 87.6 89.6
   Current Conditions 100.2 100.3 91.2 -4.3% 105.6 97.2 97.5
   Expectations 69.6 66.8 63.2 -18.3% 88.5 81.4 84.6
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