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Economy in Brief

Michigan Consumer Sentiment Up On Improved Expectations With Heightened Hopes For Gov't Policy
by Tom Moeller May 15, 2009

Improved consumer spirits regarding the outlook raised the University of Michigan's early-May reading of consumer sentiment to the highest level since September of last year. The gain in the index to a level of 67.9 exceeded Consensus expectations for a reading of 66.0.

The expectations component of consumer sentiment, which had been improving, jumped another 9.4% to its highest level since late-2007. The gain was fueled by improved expectations for business conditions during the next year which jumped also to the highest level since 2007. Expected conditions during the next year surged by a similar degree. Unlike last month, however, the higher stock market failed to lift the expected change in personal finances which deteriorated moderately.

The opinion of government policy, which may eventually influence economic expectations, jumped sharply to the highest level since 2002. Thirty-three 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 23 percent of respondents thought that a poor job was being done.

The current economic conditions index stuttered, but just slightly, as the reading for current personal finances fell. The drop was offset, however, by an improved read of current conditions for buying large household goods to the highest level since last August.

Inflation expectations for the next year fell to 2.9% versus a reading which was as high as 7.0% last May.

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.

Raising the credit bar, or getting clubbed by it? from the Federal Reserve Bank of Minneapolis can be found here.

University of Michigan Mid-May April March May y/y 2008 2007 2006
Consumer Sentiment 67.9 65.1 57.3 13.5% 63.8 85.6 87.3
  Current Conditions 66.2 68.3 63.3 -9.7 73.7 101.2 105.1
  Expectations 69.0 63.1 53.5 35.0 57.3 75.6 75.9
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