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Economy in Brief

Michigan Consumer Sentiment Improves
by Tom Moeller May 28,2010

Consumers' mood has improved, but lately not by much. The University of Michigan reported that its May reading of consumer sentiment rose to 73.6 from 72.2 during April. The slight m/m increase characterizes sentiment's performance during 2010. The figure has moved sideways following sharp improvement during 2009. The latest figure was as expected. During the last ten years there has been an 89% correlation between the level of sentiment and the y/y change in real consumer spending.

The index of expected economic conditions improved m/m to 68.8. Here again, the figure has moved sideways of late but is more than one-third above the recession low. The readings for expected change in personal finances (-3.5% y/y), business conditions during the next twelve months (10.7% y/y) and expected five-year business conditions (-6.8% y/y) each recently have been flat-to-lower.

Sentiment about current economic conditions recently moved sideways, as well. Nevertheless, it remained up 19.6% from last year and by nearly one-half from the 2008 low. The assessment of current personal finances rose nearly one-third versus last year but buying conditions for large household goods, including furniture, refrigerators, stoves & televisions, recently slipped (+16.8% y/y).

Expected price inflation during the next year increased to 4.1% and was up from the December 2008 reading of 1.7%.Respondents' view of government policy, which may eventually influence economic expectations, nudged up m/m but was down nearly one-third from its high last May. Thirteen percent of respondents thought that a good job was being done by government versus 37% who thought a poor job was being done, near the twelve-month high.

University of Michigan May Mid-May April March May y/y 2009 2008 2007
Consumer Sentiment 73.6 73.3 72.2 73.6 7.1% 66.3 63.8 85.6
  Current Conditions 81.0 81.1 81.0 82.4 19.6 69.6 73.7 101.2
  Expectations 68.8 68.3 66.5 67.9 -0.9 64.1 57.3 75.6
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