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Economy in Brief

U.S. Consumer Sentiment Gains Upward Momentum
by Tom Moeller June 11, 2010

The University of Michigan indicated that its mid-June measure of consumer sentiment added to earlier gains and rose to 75.5, its highest level since January 2008. Since its low late in 2008 the measure has risen by more than one-third. 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 led last month's advance with a 2.8% increase to 70.7. The index was up 43.7% from the 2008 low. The readings for the expected change in personal finances (-3.3% y/y) and expected five-year business conditions (1.2% y/y) both improved. Expectations for business conditions during the next year slipped (+14.5% y/y).

Sentiment about current economic conditions also improved to the highest level since early-2008 and it was up 44.2% from the 2008 low. The assessment of current personal finances continued its steady improvement and buying conditions for large household goods, including furniture, refrigerators, stoves & televisions, rose back to its highest level since early-2008  (12.4% y/y).

Expected price inflation during the next year fell sharply m/m to 3.1% but remained up from the December 2008 reading of 1.7%. Respondents' view of government policy, which may eventually influence economic expectations, rose m/m to its highest level since January but remained  down sharply from its high last May. Sixteen percent of respondents 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 results are based on about 320 interviews. The summary indexes are in Haver's USECON database with details in the proprietary UMSCA database.

The "Inflation" in Inflation Targeting from the Federal Reserve Bank of San Francisco is available here.

University of Michigan Mid-June May April Juney/y 2009 2008 2007
Consumer Sentiment 75.5 73.6 72.2 6.6% 66.3 63.8 85.6
Current Conditions 82.9 81.0 81.0 13.3 69.6 73.7 101.2
Expectations 70.7 68.8 66.5 2.2 64.1 57.3 75.6
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