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Economy in Brief

Michigan Consumer Sentiment Deteriorates With View Of Gov't Policy
by Tom Moeller

Despite the economy's recent improvement, it has yet to translate into a sustained rise in consumer sentiment. The University of Michigan reported that its mid-April index of consumer sentiment fell to 69.5 from 73.6 and was at its lowest level since November. The figure fell well short of Consensus expectations for a reading of 75.0. Nevertheless, sentiment remained up considerably from the low late in 2008. During the last ten years there has been a 90% correlation between the level of sentiment and the y/y change in real consumer spending.

Respondents' view of government policy, which may influence economic expectations, fell to its lowest level since January of last year. Just 11 percent of respondents thought that a good job was being done by government versus 45% who thought a poor job was being done, the highest since January '09.

The index of expected economic conditions fell 8.2% m/m to the lowest level since March of last year. The decline was led by a 9.8% decline in expectations for business conditions during the next five years to their lowest since July. Expectations for conditions during the next year fell 9.0% to their lowest since November. Perhaps more troubling was the 8.0% m/m decline in expectations for personal finances to the lowest level since February 2009.

The good news was that sentiment about current economic conditions fell a lesser 2.1% last month and remained near its cycle high. The assessment of current personal finances fell 2.6% and also remained near the cycle high and buying conditions for large household goods including furniture, refrigerators, stoves & televisions also fell just moderately.

Expected price inflation during the next year rose further to 3.8% and was up from the December 2008 reading of 1.7%.

University of Michigan Mid-April March  February April y/y 2009 2008 2007
Consumer Sentiment 69.5 73.6 73.6 6.8% 66.3 63.8 85.6
  Current Conditions 80.7 82.4 81.8 18.2 69.6 73.7 101.2
  Expectations 62.3 67.9 68.4 -1.3 64.1 57.3 75.6
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