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Economy in Brief

U.S. Consumer Sentiment Rose Further
by Tom Moeller January 20, 2006

The University of Michigan reported that consumer sentiment in January rose another 2.1% to 93.4. The rise was the third off the October low which has totaled 25.9% and the gain surpassed Consensus expectations for an increase to 92.5.

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.

The current conditions index rose 2.7% as the reading of buying conditions for large household goods rose sharply back to last year's high, though the reading of personal finances fell slightly (-4.1% y/y). Consumers' assessment of gov't economic policy (-12.2% y/y) improved to the highest level since October.

Consumers' expectations increased a moderate 1.6% following the 15.2% December spurt. Expected business conditions during the next year and during the net five years rose but expectations for personal finances gave back most of a December surge.

The mean expected inflation rate for the next twelve months fell to 3.5% from 4.1% and was below the 5.5% expected in October & September.

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 Jan  Dec Y/Y 2005 2004 2003
Consumer Sentiment 93.4 91.5 -2.2% 88.6 95.2 87.6
   Current Conditions 112.0 109.1 1.0% 105.9 105.6 97.2
   Expectations 81.5 80.2 -4.9% 77.4 88.5 81.4
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