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Economy in Brief

U.S. Consumer Sentiment Revised Higher
by Tom Moeller June 25, 2010

Consumer sentiment as reported by The University of Michigan improved even more this month than indicated by the mid-June measure. The final figure rose to 76.0, 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 1.5% increase to 69.8 and the index was up 41.9% from the 2008 low. The readings for the expected change in personal finances (-4.1% y/y) and expected five-year business conditions (-2.3% y/y) were revised lower. Expectations for business conditions during the next year were unrevised and slipped m/m (+14.5% y/y).

Sentiment about current economic conditions showed a stronger advance than initially estimated to the highest level since early-2008 and it was up roughly one-half from the 2008 low. The assessment of current personal finances continued its steady improvement (22.4% y/y) and buying conditions for large household goods, including furniture, refrigerators, stoves & televisions, rose back to its highest level since early-2008  (14.9% y/y).

Expected price inflation during the next year was revised up slightly to 3.3% but still 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. Seventeen percent of respondents thought that a good job was being done by government versus 38% 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.

University of Michigan June-Final Mid-June May April June Y/Y 2009 2008 2007
Consumer Sentiment 76.0 75.5 73.6 72.2 7.3% 66.3 63.8 85.6
Current Conditions 85.6 82.9 81.0 81.0 16.9 69.6 73.7 101.2
Expectations 69.8 70.7 68.8 66.5 0.9 64.1 57.3 75.6
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