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Economy in Brief

U.S. Consumer Sentiment Weakens Markedly in Early December
by Carol Stone  December 7, 2012

The University of Michigan's Index of Consumer Sentiment dropped sharply in early December to 74.5 (Q1 1966 = 100) from 82.7 in November. This move negated market forecasts for a steady reading of 82.8, and returned the index about to its August value of 74.3 after a three-month improvement that had carried the measure back to pre-recession levels.

Notably, consumers' judgment of current conditions held up pretty well, edging lower by less than 1 point to 89.9 from 90.7 for November. This means both November and December readings are above September's 85.7 and October's 88.1, suggesting that Hurricane Sandy did not have a visible impact on people's feeling about the economy. However, their expectations suffered significantly in recent weeks, as that subset of the index fell to 64.6 from 77.6 in November. This 13.0-point drop is one of four equally steep one-month plunges in the last 25 years. We would guess that people are distressed over the lack of movement in the fiscal cliff negotiations in Washington and concerned about impending tax hikes and the spending sequester that could result.

The Reuters/University of Michigan survey data are not seasonally adjusted. The readings are based on telephone interviews with over 300 households. Data can be found in Haver's USECON database. The forecast figure is from Action Economics and can be found in Haver's AS1REPNA database.

University of Michigan (Q1'66 = 100)
Mid-Dec Nov Oct Sep Dec 2011 2012 2011 2010
Consumer Sentiment 74.5 82.7 82.6 78.3 69.9 76.7 67.3 71.8
Current Economic Conditions 89.9 90.7 88.1 85.7 79.6 85.9 79.1 80.9
Consumer Expectations 64.6 77.6 79.0 73.5 63.6 70.8 59.8 66.0
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