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Economy in Brief

Consumer Sentiment Unexpectedly Firm, Again
by Tom Moeller   December 10, 2010

The happier mood adopted by the consumer this past summer brightened further this holiday season. During early-December the University of Michigan Index of Consumer Sentiment rose to 74.4 from 71.6 last month. It was the highest level since June and again it beat Consensus expectations for 72.5. 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.

The brightening of consumer attitudes was across-the-board. The index of sentiment regarding current economic conditions improved to 85.7 which was its highest since January 2008. That was led by another jump in attitudes about conditions for buying a large household good such as furniture, a refrigerator, stove or a television. Sentiment concerning personal finances held steady m/m as it has since June. The index of consumer expectations gained more modestly to 66.8 which was its highest in six months. The expected change in personal finances was notably subdued and a slight m/m increase left the index below this year's high. Expected buying conditions were firmer.

Expected price inflation during the next year rose to 3.8%, its highest level since May. Respondents' view of government policy, which may eventually influence economic expectations, slipped m/m to a reading of 68; near its lowest since January 2009. Twelve percent of respondents thought that a good job was being done by government while 44% thought a poor job was being done, nearly 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.

Federal Reserve Study Shows More Than Three-Quarters of Noncash Payments Are Now Electronic is available here.

University of Michigan
(Q1'66 = 100)
Dec Prelim Nov Oct Dec Y/Y % 2010 2009 2008
Consumer Sentiment 74.4 71.6 67.7 2.3 71.8 66.3 63.8
  Current Economic Conditions 85.7 82.1 76.6 9.9 81.0 69.6 73.7
    Personal Finances 81 81 78 11.0 79 67 78
    Buying Conditions For Large Household Goods 141 131 119 10.2 130 112 112
  Expectations 66.8 64.8 61.9 -3.0 65.9 64.1 57.3
    Expected Change In Personal Finances 111 109 110 -4.3 110 113 107
    Business Conditions Next 12 Months 77 71 67 -2.5 75 65 48
    Business Conditions Next 5 Years 78 78 70 -3.7 79 78 73
 
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