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Economy in Brief

Michigan Consumer Sentiment Down Yet Again
by Tom Moeller April 11, 2008

The preliminary reading of April consumer sentiment from the University of Michigan fell another 9.1% m/m to 63.2. Consensus expectations had been for a lesser decline to 69.0. The decline dropped sentiment to near its lowest level since 1982.

The expectations component accounted for the largest part of the decline in April sentiment with an 11.1% m/m drop. The index is at its lowest since 1990. Expectations for personal finances fell out of bed with a 13.4% m/m drop (-23.6% y/y). Expectations for business conditions during the next year also fell a hard 8.7% (-51.7% y/y). Expectations for conditions over the next five years fell 11.1% m/m (-20.0% y/y).

Opinions about government policy, which apparently influence economic expectations, fell 4.4% m/m (-28.6% y/y). The percentage of those surveyed who indicated that they thought government was doing a good job fell to the lowest level since 1992 and 43% had a poor opinion.

The mean expectation for inflation during the next twelve months rose again last month to 5.6%, nearly the highest level since 1990.

The current conditions index fell 6.9% m/m after a slight rise during March. The view of current conditions for buying large household goods fell hard (-24.3% y/y) and the view of current personal finances also fell sharply (-26.9% y/y).

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.

The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis from Atif R. Mian and Amir Sufi at the University of Chicago can be found here.

University of Michigan April (Prelim.) March Feb April y/y 2007 2006 2005
Consumer Sentiment 63.2  69.5 70.8 -27.4% 85.6 87.3 88.5
  Current Conditions 78.4 84.2 83.8 -25.0% 101.2 105.1 105.9
  Expectations 53.4 60.1 62.4 -29.6% 75.6 75.9 77.4
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