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Economy in Brief

U.S. Consumer Sentiment Again Stronger Than Expected
by Tom Moeller December 23, 2005

Consumer sentiment late in December added to gains earlier in the month, reported the University of Michigan. At 91.5 for the month as a whole, sentiment rose 12.1% from November which had risen 10.0% from October and beat Consensus expectations for an increase to 89.0.

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 rose 15.2% on top of a 10.1% November gain to the highest level since July. Expected business conditions during the next year surged again and the index has improved more than two thirds since September. Expectations for personal finances also jumped. Adding to a small improvement the gains halted declines during the Summer.

The mean expected inflation rate for the next twelve months held steady m/m at 4.1% and was below the 5.5% expected in October & September.

The current conditions index rose 8.9% following a similar gain in November. The reading of personal finances surged 15.5% (6.3% y/y) and the reading of buying conditions for large household goods jumped for the second straight month (-0.6% y/y).Decline's in consumers' reading of gov't economic policy (-20.0% y/y) have stabilized during the last two months.

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 Dec Dec (Prelim.) Nov Y/Y 2004 2003 2002
Consumer Sentiment 91.5 88.7 81.6 -5.8% 95.2 87.6 89.6
   Current Conditions 109.1 106.6 100.2 2.2% 105.6 97.2 97.5
   Expectations 80.2 77.3 69.6 -11.8% 88.5 81.4 84.6
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