Consumer Sentiment Ticks Higher With Inflation Expectations

Consumer sentiment has barely improved since mid-year. The University of Michigan Index of Consumer Sentiment reported that its mid-month measure for November inched up from October to 69.3 after four months of being roughly unchanged. The figure roughly matched Consensus expectations. Despite this uninspiring performance, consumer spending has improved moderately, especially on autos. During the last ten years there has been a 63% correlation between the level of sentiment and the three-month growth in real consumer spending.

The current conditions figure provided most of the lift to the November total with a rise to 79.7 from 76.6. Perceived buying conditions for large household goods recovered some of its decline during the prior four months. The assessment of current personal finances continued its recent sideways trend.The consumer expectations index ticked higher to 62.7, its highest level in three months. Feelings about business conditions during the next twelve months as well as the next five years rose slightly from October but not enough to recover declines since the Spring. The expected change in personal finances fell m/m and matched the lowest level since March 2009.

Expected price inflation during the next year jumped to 3.6%, its highest level since May. Respondents' view of government policy, which may eventually influence economic expectations, fell further this month to an index reading of 64, its lowest since January 2009. Thirteen percent of respondents thought that a good job was being done by government while 49% thought a poor job was being done, 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.