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Economy in Brief

Michigan Consumer Sentiment Recoups Earlier Declines
by Tom Moeller December 11, 2009

Consumer sentiment began this month by retracing the declines of October and November. The 8.9% m/m rise in sentiment to a reading of 73.4, as measured by the Reuters/University of Michigan Index of Consumer Sentiment, also was near the highest since January of last year. The latest figure surpassed Consensus expectations for a level of 69.0. Sentiment was up by one-third from the low of last fall. During the last ten years there has been a two-thirds correlation between the level of sentiment and the three-month change real consumer spending.

Sentiment about current economic conditions jumped 15.0% from November to the highest level since March of last year. Assessments of current financial conditions were quite strong and rose to the highest since last September. Buying conditions for large household goods, including furniture, refrigerators, stoves & televisions, also moved up by 15.8% to the highest level since January 2008.

The mid-December reading on expected economic conditions also jumped, but by a lesser 4.8% m/m to the highest level since September. The outlook for business conditions during the next twelve months improved sharply and recovered November's decline but the expected change in personal finances and expected business conditions during the next five years advanced just modestly. All three of these readings recently have been flat after sharp improvement early this year.

Expected price inflation during the next year held steady m/m at 3.1% but it was up from last December's reading of 1.7%.Respondents' view of government policy, which may eventually influence economic expectations, fell sharply m/m to the lowest level since March. Seventeen percent of respondent thought that a good job was being done by government versus 36% who thought a poor job was being done.

The Reuters/University of Michigan survey data are not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end. These mid-month results are based on about 320 interviews. The summary indexes are in Haver's USECON database with details in the proprietary UMSCA database.

University of Michigan Mid-December November October Dec y/y 2009 2008 2007
Consumer Sentiment 73.4 67.4 70.6 22.1% 66.3 63.8 85.6
  Current Conditions 79.1 68.8 73.7 13.8 79.1 73.7 101.2
  Expectations 69.7 66.5 68.6 29.1 64.2 57.3 75.6
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