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Economy in Brief

Michigan Consumer Sentiment Down in December
by Tom Moeller December 21, 2007

The University of Michigan's consumer sentiment index for all of this month fall 0.9% to 75.5.That was somewhat better than the reading at mid-month and it beat expectations for a December reading of 74.9. Nevertheless it left sentiment down 17.7% y/y.

Somewhat improved expectations caused the better December result. Expected business conditions during the next year fell only 6.8% (-35.2% y/y), an improvement from the -11.0% preliminary reading. Expectations for business conditions during the next five years also improved 6.6% (-16.5% y/y) from the November level and versus the initial read of a m/m decline. Down still is the result versus 3Q. Expectations for personal finances fell further by 2.6% (-9.7% y/y).

The current conditions index in fact was revised lower from the mid-month reading and fell 0.5% after a hefty 6.3% November decline. 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).

The rise in gasoline prices raised expectations for inflation during the next twelve months to 4.4% (slightly lower than the mid-month read) 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 dropped 9.8% m/m which brought this opinion measure down 16.9% 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 (Final) Dec (Prelim) Nov Dec  y/y 2006 2005 2004
Consumer Sentiment 75.5 74.5 76.1 -17.7% 87.3 88.5 95.2
   Current Conditions 91.0 92.1 91.5 -15.8% 105.1 105.9 105.6
   Expectations 65.6 63.2 66.2 -19.2% 75.9 77.4 88.5
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