Global| Aug 17 2007Michigan Consumer Sentiment Fell Sharply, Fed's Discount Rate Cut
by:Tom Moeller
|in:Economy in Brief
Summary
The University of Michigan's preliminary reading of consumer sentiment in August fell 7.9% m/m to 83.3. The decline was the largest m/m drop in over a year and, likewise, pulled the index to its lowest level since last August. [...]
The University of Michigan's preliminary reading of consumer sentiment in August fell 7.9% m/m to 83.3. The decline was the largest m/m drop in over a year and, likewise, pulled the index to its lowest level since last August. Consensus expectations had been for a lesser decline to 87.
A 9.1% decline in consumer expectations led this month's decline in overall sentiment.
Consumers worried that business conditions during the next six months would deteriorate and the index measuring these expectations fell 14.3% (+20.0% y/y). Expectations for business conditions during the next five years also fell (-7.3% m/m, +6.0% y/y). Finally, the index measuring the expected change in consumers' finances fell 5.6% (+5.4% y/y) and reversed most of the prior month's increase.
Perceptions about current economic conditions also fell. The view of current personal finances fell 13.0% (-8.3% y/y) and consumers' view of current buying conditions for large household goods fell 1.9% (-4.4% y/y).
The assessment of government policy fell a hard 7.0% m/m (-2.4% y/y) to the lowest level in over one year..
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end.
The U.S. Federal Reserve today took action to reduce the Discount Rate. An accompanying statement to this action can be found here. Today's actionis meant toencourage the use of the discount window by specific banksthat need more liquidity without reducing the cost of funds toall banks, as an easing of the fed funds rate would do.
William Poole, President, Federal Reserve Bank of St. Louis, spoke today on U.S. Export Opportunities and his comments are available here
| University of Michigan | August (Prelim.) | July | Aug y/y | 2006 | 2005 | 2004 |
|---|---|---|---|---|---|---|
| Consumer Sentiment | 83.3 | 90.4 | 1.6% | 87.3 | 88.5 | 95.2 |
| Current Conditions | 97.7 | 104.5 | -5.9% | 105.1 | 105.9 | 105.6 |
| Expectations | 74.1 | 81.5 | 9.0% | 75.9 | 77.4 | 88.5 |
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.
More Economy in Brief
