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Economy in Brief

Consumer Sentiment Improves Beyond Expectations
by Tom Moeller   November 24, 2010

The sour mood adopted by the consumer this summer seems to be brightening. For November, the full-month consumer sentiment reading of 71.6 was a marked improvement from mid-month. The University of Michigan Index of Consumer Sentiment indicated that the latest figure was the highest since June and it handily beat Consensus expectations for 69.5. During the last ten years there has been a 60% correlation between the level of sentiment and the three-month growth in real consumer spending.

Like mid-month, the full-month current conditions figure provided most of the lift to the November total with a rise to 82.1 from 76.6. Perceived buying conditions for large household goods improved the most followed by the assessment of current personal finances. The consumer expectations index rose to 64.8, its highest since June. Feelings about business conditions during the next twelve months as well as the next five years rose from October but not enough to recover declines since the spring. The expected change in personal finances slipped m/m though less than at mid-month.

Expected price inflation during the next year jumped to 3.7%, its highest level since May. Respondents' view of government policy, which may eventually influence economic expectations, ticked up m/m to a reading of 69; still near its lowest since January 2009. Thirteen percent of respondents thought that a good job was being done by government while 44% thought a poor job was being done, near the most since January 2009.

The Reuters/University of Michigan survey data are not seasonally adjusted. The readings are based on telephone interviews with just over 300 households during early-to-mid November. The summary indexes are in Haver's USECON database with details in the proprietary UMSCA database.

University of Michigan Nov Mid-Nov Oct Sep Nov Y/Y % 2009 2008 2007
Consumer Sentiment 71.6 69.3 67.7 68.2 6.2 66.3 63.8 85.6
Current Economic Conditions 82.1 79.7 76.6 79.6 19.3 69.6 73.7 101.2
Expectations 64.8 62.7 61.9 60.9 -2.6 64.1 57.3 75.6
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