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Economy in Brief

Michigan Consumer Sentiment Improves Further To Highest Since September
by Tom Moeller May 1, 2009

Despite lower levels of employment, the University of Michigan's April reading of consumer sentiment added to its March improvement and rose to the highest level since September of last year. The gain in the index to a level of 65.1 was steeper than the mid-month indication of a rise to 61.9 and exceeded Consensus expectations for a reading of 61.7.

The expectations component of consumer sentiment continued to show the largest improvement in April with a 17.9% rise on top of the 5.9% March rise. Expectations for business conditions during the next five years moved up by more than one-quarter m/m to the highest level since September (+14.1% y/y). Expected conditions during the next year rose by roughly the same amount m/m and they're up by more than one-third y/y. Finally, the higher stock market lifted the expected change in personal finances. The reading made up declines early this year with a 11.5% m/m increase to the highest level since September.

The current economic conditions index made up the declines of the prior two months with a 7.9% rise which was near the gain indicated mid-month. Buying conditions for large household goods recouped the declines of earlier this year while the view of current personal finances improved with the stock market and lessened growth in debt.

The opinion of government policy, which may eventually influence economic expectations, was roughly unchanged m/m but held onto its sharp February and March gains. The level was near the highest level since January of 2007. Twenty-one 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 26 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 3.1% though they were as high as 7.0% last May. The median expected increase rose to 2.8% 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 rose slightly to 3.1%.

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 Final-April Mid-April March February April y/y 2008 2007 2006
Consumer Sentiment 65.1 61.9 57.3 56.3 4.0% 63.8 85.6 87.3
  Current Conditions 68.3 66.6 63.3 65.5 -11.3 73.7 101.2 105.1
  Expectations 63.1 58.9 53.5 50.5 18.4 57.3 75.6 75.9
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