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Economy in Brief

U.S. Consumer Sentiment Slipped in Late April
by Tom Moeller April 28, 2006

Consumer sentiment slipped late this month. The final reading from the University of Michigan's stood a 87.4 versus a preliminary indication of 89.2 posted two weeks ago. Consensus expectations had been for a reading of 89.0.

Expectations for the economy worsened and for price inflation, moved up. 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 ended up about unchanged index for the month versus a preliminary indication of moderate m/m 1.8% improvement. The index of personal finances rose slightly (5.3% y/y) after a sharp gain during March but the reading of buying conditions for large household goods was unchanged (4.4% y/y). Consumers' assessment of gov't economic policy fell hard late in the month and was unchanged for the whole period versus March (-4.5% y/y).

The index of consumer expectations fell 3.4% m/m and that was much worse than the preliminary indication of a 1.2% slip. The near term economic outlook took a powder late in the month and fell 10.4% y/y and the long term outlook reversed much of the prior month's improvement (-8.8% y/y).

The mean expected inflation rate for the next twelve months jumped to 4.4% from an expected 3.8% last month due the rise in gasoline prices.

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 87.4 88.9 -0.3% 88.6 95.2 87.6
   Current Conditions 109.2 109.1 4.6% 105.9 105.6 97.2
   Expectations 73.4 76.0 -4.7% 77.4 88.5 81.4
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