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Economy in Brief

Michigan Consumer Sentiment Down Hard
by Tom Moeller December 7, 2007

The University of Michigan's consumer sentiment index for early this month slid 2.1% to 74.5 from an upwardly revised November level. It was the third consecutive monthly decline and for the fourth quarter sentiment looks to have dropped 10% from the 3Q average.

The current conditions index stabilized a bit and rose 0.7% after a hefty 6.3% November decline. Conversely, the expectations index continued the prior two month's rate of decline and fell 4.5% m/m to 63.2, the lowest reading since 2005.

Current buying conditions for large household goods improved modestly m/m but remained down 13.0% from last December. The view of current personal finances, however, slid 3.0% for the second sharp monthly decline (-17.6% y/y).

Expectations for personal finances fell 3.5%, repeating a November drop (-10.5% y/y) and expectations for business conditions during the next year fell 11.0% (-38.1% y/y). Expectations for business conditions during the next five years, however, remained stable with the November level which was still depressed by nearly one quarter from a year ago.

The rise in gasoline prices has raised expectations for inflation during the next twelve months to 4.5% from 4.3% in November and from 3.5% one year ago. For the next five to ten years expectations were for a 3.6% rise in prices.

Opinions about government policy fell sharply. The 7.3% m/m decline brought this opinion measure down 14.6% from one year ago.

The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver's USECON database, with details in the proprietary UMSCA database.

Consumer sentiment, the economy, and the news media is a 2004 paper from the Federal Reserve Bank of San Francisco and it can be found here.

University of Michigan Dec (Prelim Nov Nov  y/y 2006 2005 2004
Consumer Sentiment 74.5 76.1 -18.8% 87.3 88.5 95.2
   Current Conditions 92.1 91.5 -14.8% 105.1 105.9 105.6
   Expectations 63.2 66.2 -22.2% 75.9 77.4 88.5
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