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Economy in Brief

Michigan Consumer Sentiment Fell Again
by Tom Moeller March 14, 2008

The University of Michigan's consumer sentiment index, in the preliminary reading for March, fell another 0.4% m/m to 70.5 after the 9.7% plunge during February. Consensus expectations had been for a somewhat sharper decline to a reading of 70.1 for early this month.

A lower index of expected business conditions during the next year accounted for all of the decline in overall March sentiment. The 1.6% decline followed an 8.4% February drop and left the index at its lowest since early 1992. Expectations for business conditions during the next year fell 6.0% (-49.5% y/y) but expectations for conditions over the next five years rose, making up virtually all of a February decline. They remained down 7.4% y/y. Expectations for personal finances also improved and made up a February drop but still were down 7.4% y/y.

Opinions about government policy were stable m/m (-22.5% y/y) following the sharp 11.5% shortfall during February. The percentage of those surveyed who indicated that they thought government was doing a good job made up the February decline. They rose to 13% but an increased 44% had a poor opinion.

Expectations for inflation during the next twelve months surged to 4.6%, the highest level in nearly two years though inflation expectations during the next five to ten years fell slightly to 3.3%.

The current conditions index rose a slight 1.0% m/m after the 11.2% February slide. The view of current conditions for buying large household goods ticked up 1.6% after falling 15.8% m/m in February and the view of current personal finances was unchanged after a 4.1% (-15.3% y/y) February drop.

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.

Assessing Employment Growth in 2007 from the Federal Reserve Bank of San Francisco can be found here.

University of Michigan March (Prelim) Feb Jan March y/y 2007 2006 2005
Consumer Sentiment 70.5 70.8 78.4 -20.2% 85.6 87.3 88.5
  Current Conditions 84.6 83.8 94.4 -18.3% 101.2 105.1 105.9
  Expectations 61.4 62.4 68.1 -22.0% 75.6 75.9 77.4
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