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Economy in Brief

Michigan Consumer Sentiment Improves Again
by Tom Moeller April 17, 2009

Despite higher unemployment, the University of Michigan indicated that its mid-April reading of consumer sentiment rose for a second consecutive month. In fact, the index level of 61.9 was its highest since September of last year. The improvement, however, has been just creeping. The rise from last year's low leaves it still down 20.7% from early 2008 and down by 36.1% from early 2007.

The expectations component of consumer sentiment showed the largest improvement this month with a 10.1% rise on top of the 5.9% March improvement. Expectations for business conditions during the next five years moved up by 19.0% m/m to the highest level since September (+5.6% y/y). Expected conditions during the next year rose a lesser 9.1% though the reading was a sharply from that of last spring. Finally, the higher stock market lifted the expected change in personal finances. The reading made up declines early this year with a 7.7% increase.

The current economic conditions index made up the declines of the prior two months with a 5.2% rise. Buying conditions for large household goods recouped the declines of earlier this year while the view of current personal finances remained unchanged m/m, down by one-half from early 2007.

The opinion of government policy, which may eventually influence economic expectations, slipped m/m but remained near the highest level since January of 2007. Twenty 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 thirty percent thought that a poor job was being done.

Probably reflecting the recent rise in oil prices, inflation expectations for the next year rose to 3.4% though they were as high as 7.0% last May. The median expected increase rose to 3.0% from 2.0%. The range of expectations is from slight price deflation to a 5.2% increase in prices. The expected inflation rate during the next five years reversed slipped to 2.8%.

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.

University of Michigan Mid-April March February April y/y 2008 2007 2006
Consumer Sentiment 61.9 57.3 56.3 -1.1% 63.8 85.6 87.3
  Current Conditions 66.6 63.3 65.5 -13.5 73.7 101.2 105.1
  Expectations 58.9 53.5 50.5 10.5 57.3 75.6 75.9
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