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Economy in Brief

U.S. Consumer Sentiment Down Unexpectedly
by Tom Moeller February 17, 2006

Consumer sentiment, according to the University of Michigan, fell this month. The preliminary sentiment index fell 4.2% m/m to 87.4 and compared to Consensus expectations for a roughly unchanged reading of 91.0.

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.

Lower consumer expectations led the decline with a 5.7% drop following the 1.6% January fall. The long term economic outlook deteriorated sharply as the index of expected business conditions during the next five years fell 8.8% (-15.3% y/y). The one year outlook for business conditions suffered as well with the index down 6.7% (-14.0% y/y) and expectations for personal finances slipped another 1.7% (-7.1% y/y).

The mean expected inflation rate for the next twelve months was about stable m/m at 3.7%, still well below the 5.5% expected in October & September.

The current conditions index declined 2.4% as the reading of personal finances fell 2.5% (-5.0% y/y) and of buying conditions for large household goods fell 1.8%. Consumers' assessment of gov't economic policy slipped m/m (-9.7% 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.

University of Michigan Feb Jan Y/Y 2005 2004 2003
Consumer Sentiment 87.4 91.2 -7.1% 88.6 95.2 87.6
   Current Conditions 107.7 110.3 -1.4% 105.9 105.6 97.2
   Expectations 74.4 78.9 -11.8% 77.4 88.5 81.4
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