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Economy in Brief

U.S. Consumer Sentiment Recovered Late in March
by Tom Moeller March 31, 2006

During late March, consumer sentiment recovered enough to lift the University of Michigan's Sentiment Index for the month to 88.9 from a preliminary indication of 86.7. Consensus expectations had been for a reading of 87.0.

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.

The current conditions index for the month improved 3.3% after a 4.3% decline during February. The index of personal finances recovered all of the prior month's drop with a 5.4% (+0.9% y/y) gain and the reading of buying conditions for large household goods rose 1.9% (1.2% y/y). Consumers' assessment of gov't economic policy improved late in the month enough to recover a piece of the sharp decline during February.

Consumer expectations rose 2.0% from February due to the late month improvement. The near term economic outlook still fell m/m but the long term outlook improved dramatically.

The mean expected inflation rate for the next twelve months rose m/m to 3.8%, still down from 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.

Variations in consumer sentiment across demographic groups from the Federal Reserve Bank of Chicago is available here.

University of Michigan March March (p) Feb Y/Y 2005 2004 2003
Consumer Sentiment 88.9 86.7 86.7 -4.0% 88.6 95.2 87.6
   Current Conditions 109.1 106.2 105.6 1.0% 105.9 105.6 97.2
   Expectations 76.0 74.2 74.5 -8.2% 77.4 88.5 81.4
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