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Economy in Brief

U.S. Consumer Sentiment Stronger Than Expected
by Tom Moeller December 9, 2005

Consumer sentiment in early December rose more than generally expected, reported the University of Michigan. The 8.7% m/m rise to 88.7 added to a 10.0% rise in November and beat Consensus expectations for an increase to 85.0.

During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending.

Consumers' expectations again improved sharply and the index rose 11.1% on top of a 10.1% November gain. Expected business conditions during the next year rose sharply for the third straight month though the level remained down 21.3% versus last year. Expectations for personal finances also rose sharply m/m but here again the index level remained lower than last year by 3.1%. The mean expected inflation rate for the next twelve months held steady m/m at 4.2% though that was below the 5.5% expected in October & September.

The current conditions index added 6.4% to the 9.9% November gain but remained well depressed versus last year. The reading of personal finances surged 12.6% (+3.6% y/y) and the reading of buying conditions for large household goods added to November's 12.9% jump ((-3.0% y/y).Weighing on sentiment is consumers' reading of gov't economic policy (-20.0% y/y).

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 Dec (Prelim.) Nov Y/Y 2004 2003 2002
Consumer Sentiment 88.7 81.6 -8.7% 95.2 87.6 89.6
   Current Conditions 106.6 100.2 -0.1% 105.6 97.2 97.5
   Expectations 77.3 69.6 -15.0% 88.5 81.4 84.6
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