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Economy in Brief

Michigan Consumer Sentiment Revised Little And Remains Near High
by Tom Moeller

Contrary to yesterday's troubling report of lower consumer confidence, the Reuters/University of Michigan Index of Consumer Sentiment for February fell just slightly to 73.6. The figure remained near its two-year high of 74.4 reached last month and was little different from the mid-month report. The latest figure fell just short of Consensus expectations for 74.0 though it compares favorably to the low of 55.3 in November 2008. During the last ten years there has been a 61% correlation between the level of sentiment and the three-month change real consumer spending.

Expected economic conditions accounted for the m/m decline with a lessened 2.4% m/m drop to the lowest level since November. Expectations for business conditions during the next year and during the next five years fell moderately but expectations for personal finances fell to the lowest level in twelve months.

Sentiment about current economic conditions increased a lessened 0.9% but that still was to the highest level since March 2008. Assessments of current financial conditions were unchanged m/m at their highest since September of 2008. Buying conditions for large household goods, including furniture, refrigerators, stoves & televisions, moved up another 2.3% to the highest level since January 2008 but the view of current personal finances slipped (+15.4% y/y) following two months of strength.

Expected price inflation during the next year was firmer than indicated earlier at 3.6% and was up from the December 2008 reading of 1.7%.Respondents' view of government policy, which may eventually influence economic expectations, fell to its lowest level in twelve months. Just thirteen percent of respondents thought that a good job was being done by government versus 41% who thought a poor job was being done, a twelve-month high.

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 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 Final - February Mid-February January December Feb. y/y 2009 2008 2007
Consumer Sentiment 73.6 73.7 74.4 72.5 30.7% 66.3 63.8 85.6
  Current Conditions 81.8 84.1 81.1 78.0 24.9 69.6 73.7 101.2
  Expectations 68.4 66.9 70.1 68.9 35.4 64.1 57.3 75.6
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