
Michigan Consumer Sentiment Declines As The Reading of Personal Finances Falls To A Record Low
by:Tom Moeller
|in:Economy in Brief
Summary
Worries about personal finances and the shape of the U.S. economy persisted this month. The University of Michigan's early-August reading of consumer sentiment fell to 63.2 from 66.0 during July and was down for the third consecutive [...]
Worries
about personal finances and the shape of the U.S. economy persisted
this month. The University of Michigan's early-August reading of
consumer sentiment fell to 63.2 from 66.0 during July and was down for
the third consecutive month. Moreover, sentiment was at its lowest
level since March. Consensus expectations had been for a firmer August
reading of 69.0. During the last ten years, there has been a 69%
correlation between the level of sentiment and the growth in real
consumer spending during the next five months.
The reading of current
economic conditions fell the hardest this month with a 7.9% drop which
was double the July decline. The reading of current personal finances
fell quite hard m/m as employment & income weakness lagged the
stock market's improvement. In fact, the level of the reading
was at a record low.
Also within the current conditions index
was a decline in buying conditions for large household goods to the
lowest level since April.
The expectations component of the sentiment index also fell this month. It posted a moderate 1.7% decline after the 8.7% July drop. But still the index up y/y. Expectations for personal finances fell, down for the third month in four (+1.9% y/y). Expected business conditions during the next year also fell for the second month in three but expectations for conditions during the next five years ticked higher (+6.9% y/y). Inflation expectations for the next year fell sharply to 2.9% which was the lowest level since March. That compares to a low of 1.7% last December but remained down from a reading which was as high as 7.0% during May of last year.
The opinion
of government policy, which may eventually influence economic
expectations, fell for the third straight month to its lowest level
since February. An increased 36% of respondents thought that a poor job
was being done by government while a reduced 17% thought that a good
job was being done.
The University of Michigan survey data is not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver's USECON database with details in the proprietary UMSCA database.
University of Michigan | Mid-August | July | June | Aug y/y | 2008 | 2007 | 2006 |
---|---|---|---|---|---|---|---|
Consumer Sentiment | 63.2 | 66.0 | 70.8 | 0.3% | 63.8 | 85.6 | 87.3 |
Current Conditions | 64.9 | 70.5 | 73.2 | -8.6 | 73.7 | 101.2 | 105.1 |
Expectations | 62.1 | 63.2 | 69.2 | 7.3 | 57.3 | 75.6 | 75.9 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.