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Economy in Brief

Michigan Consumer Sentiment Improves As The Opinion Of Government Jumps
by Tom Moeller March 27, 2009

As reported mid-month, consumers' moods have stabilized as suggested by the University of Michigan. It reported that the full month March reading of consumer sentiment held stable in the range of the last several months. Despite this stability, however, the latest figure was down 17.6% from last March. During the last ten years, there has been a 63% correlation between the level of sentiment and the three-month change in real personal consumption expenditures. The March reading came in slightly above Consensus expectations.

The expectations component of consumer sentiment firmed a bit and recovered nearly half of the February decline. Expectations for business conditions during the next year led that increase but remained near the lowest level since 1980.  Expectations for conditions during the next five years fell slightly to the lowest level since last June.

The expected change in personal finances ticked higher.

The current economic conditions index also improved slightly from February after an initial reading of sharp decline. Buying conditions for large household goods fell just slightly m/m but they remained down 21.0% from a year earlier. The view of current personal finances also fell and remained down by one-half from early 2007.

The opinion of government policy, which may eventually influence economic expectations, improved sharply to the highest level since January of 2007. Twenty two percent of respondents thought that a good job was being done by government, up from the four percent low of last December, while a much reduced twenty eight percent thought that a poor job was being done.

Inflation expectations for the next year were about stable at 2.4%. They were as high as 7.0% last May. The range of expectations is from slight price deflation to a 5.3% increase in prices. The expected inflation rate during the next five years reversed most of the increases during the last two months and fell to 2.9%.

The University of Michigan survey data 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.

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University of Michigan March (Final) Mid-March February January March y/y 2008 2007 2006
Consumer Sentiment 57.3 56.6 56.3 61.2 -17.6% 63.8 85.6 87.3
  Current Conditions 63.3 62.3 65.5 66.5 -24.8 73.7 101.2 105.1
  Expectations 53.5 53.0 50.5 57.8 -11.0 57.3 75.6 75.9
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