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Economy in Brief

U.S. Consumer Sentiment Inched Higher
by Tom Moeller April 13, 2006

Consumer sentiment inched 0.3% higher early in April on the heels of the moderate 2.5% improvement during March. The University of Michigan's Sentiment Index rose to 89.2 and about matched Consensus expectations.

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 1.8% after 3.3% during March. The index of personal finances added 1.7% (6.2% y/y) to the 5.4% improvement during March and the reading of buying conditions for large household goods rose 1.8% (6.3% y/y) following a similar increase the month prior. Consumers' assessment of gov't economic policy improved sharply (-1.1% y/y) and reversed the m/m declines of the prior two months.

Consumer expectations slipped for the third month this year due to a worsened short (-4.2% y/y) and long (-8.8% y/y) term outlook for business conditions. The expected change in personal finances improved for the third consecutive month (+3.3% y/y).

The mean expected inflation rate for the next twelve months was stable m/m at 3.8% and remained down from the 5.5% expected in October & September. For the next 5-10 years an inflation rate of 3.4% is expected.

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 April March Y/Y 2005 2004 2003
Consumer Sentiment 89.2 88.9 1.7% 88.6 95.2 87.6
   Current Conditions 111.1 109.1 6.4% 105.9 105.6 97.2
   Expectations 75.1 76.0 -2.5% 77.4 88.5 81.4
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