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Economy in Brief

U.S. Consumers Felt a Little Better in Early June
by Tom Moeller June 16, 2006

Consumer sentiment early this month improved according to the University of Michigan. The preliminary June index rose to 82.4 from a low 79.1 during May but recovered less than half of that month's decline. Consensus expectations had been for a further slide to 78.5.

During the last ten years there has been a 77% correlation between the level of consumer sentiment and the y/y change in real consumer spending.

The reading of current economic conditions recovered more than half of the May decline with a 7.3% increase as the index of current personal finances rose 9.8% (-8.2% y/y). The reading of buying conditions for large household goods also recouped half of the May decline with a 5.4% (-9.9% y/y) increase.

Expectations for the economy improved a modest 1.5% after the 7.1% slide during May, bolstered by slightly improved expectations for personal finances and buying conditions during the next year. But long term (5 year) expectations for buying conditions fell a sharp 7.5% (-28.2% y/y) as consumers' opinion about gov't economic policy cratered another 6.5% m/m (-22.6% y/y) to the lowest level since 1993.

Expected inflation during the next year slipped modestly to 4.6% but the five to ten year expected rate of inflation rose to 3.8%, near the nine year high.

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.

Why Are Yield Curves So Flat and Long Rates So Low Globally? is a speech by Fed Governor Randall S. Kroszner and can be found here.

The latest Beige Book covering regional economic conditions from the Federal Reserve Board can be found at this link.

University of Michigan June (Prelim. May Y/Y 2005 2004 2003
Consumer Sentiment 82.4 79.1 -14.2% 88.6 95.2 87.6
   Current Conditions 103.1 96.1 -8.9% 105.9 105.6 97.2
   Expectations 69.2 68.2 -18.6% 77.4 88.5 81.4
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