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Economy in Brief

U.S. Consumer Sentiment Fell Throughout February
by Tom Moeller March 3, 2006

According to the University of Michigan, consumer sentiment fell throughout February, as indicated by a decline in the final month reading to 86.7 from the preliminary estimate of 87.4. Month to month, sentiment fell 4.9% and the decline outpaced Consensus expectations for decline to 87.5.

The m/m decline matched the Conference Board's report Tuesday that Consumer Confidence fell 4.8% (-2.6% y/y) during February.

Sentiment figures are not seasonally adjusted and 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 deteriorated 1.9% late in February and fell 4.3% for the full period as the index of personal finances fell 5.1% (-7.4% y/y) and the reading of buying conditions for large household goods fell 3.6% (0.0% y/y). Consumers' assessment of gov't economic policy drooped 4.6% m/m (-10.8% y/y).

Consumer expectations held steady late in the month but for all of February were off 5.6% from January. The economic outlook deteriorated sharply with the index of expected business conditions during the next five years down 12.1% (-18.4% y/y) and the twelve month outlook off 8.6% (-15.8% y/y). Expectations for personal finances showed a m/m improvement of 1.7% (-3.9% 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 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.

Income Taxes: Who Pays and How Much? from the Federal Reserve Bank of St. Louis is available here.

University of Michigan Feb (Final) Feb (Prelim.) Jan Y/Y 2005 2004 2003
Consumer Sentiment 86.7 87.4 91.2 -7.9% 88.6 95.2 87.6
   Current Conditions 105.6 107.7 110.3 -3.3% 105.9 105.6 97.2
   Expectations 74.5 74.4 78.9 -11.7% 77.4 88.5 81.4
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