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Economy in Brief

Michigan Consumer Sentiment Increases Smartly
by Tom Moeller December 23, 2009

Though the December Reuters/University of Michigan Index of Consumer Sentiment slipped from mid-month, is 7.6% increase to 72.5 recovered most of the declines during the prior two months. The latest figure fell short of Consensus expectations for a level of 73.8. Nevertheless, sentiment was up sharply from its low 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 13.4% from November to the highest level since March of last year. Assessments of  current financial conditions improved to the highest since September of last year. Buying conditions for large household goods, including furniture, refrigerators, stoves & televisions, also moved up by 12.3% to the highest level since January 2008.  

The full-month December reading on expected economic conditions recovered its November decline with a 3.6% increase to the highest level since September. The outlook for business conditions during the next twelve months improved sharply and recovered most of November's decline but the expected business conditions during the next five years fell and expected personal finances 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 was roughly steady m/m at 3.0% 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 February. Sixteen percent of respondent thought that a good job was being done by government versus 39% 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.

Inflation Expectations and the Risk of Deflation from the Federal Reserve Bank of San Francisco is available here.

University of Michigan December Mid-December November October Dec y/y 2009 2008 2007
Consumer Sentiment 72.5 73.4 67.4 70.6 20.6% 66.3 63.8 85.6
  Current Conditions 78.0 79.1 68.8 73.7 12.2 69.6 73.7 101.2
  Expectations 68.9 69.7 66.5 68.6 27.6 64.1 57.3 75.6
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