Michigan Consumer Sentiment Firm for January

The University of Michigan's final reading of consumer sentiment during January remained quite solid versus December at 96.9 (Q1 1966 = 100). The reading fell, however, from the mid-month read of 98.0.

The reading of current conditions increased to 111.3 from December's 108.1, up 3.0% after a 2.0 rise during that month.

Consumers' reading of personal finances rose 3.4%, the firmest rise in three months, as the sense of buying conditions for large household goods rose 3.1% after a 3.2% December gain.

The expectations component recouped all of the decline during the prior two months with a 7.9% increase and the rise was to the highest level since 2004. Expected business conditions surge 12.4% and expected personal finances rose 2.4% (5.8% y/y).

Consumers' assessment of government policy and performance rose to the highest level since 2005 but expectations about inflation during the next twelve months rose slightly to 3.6%.

The University of Michigan survey is not seasonally adjusted.This mid-month survey was based on telephone interviews with about 340 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month-end.

Factory inventories inched up just 0.1% during December after a slowed 0.2% November gain. The 0.6% increase in factory inventories during 4Q06 was the slowest since 3Q05.

Primary metals inventories actually fell during the last two months (+17.9% y/y). Automobile inventories also plummeted 11.8% (+6.3% y/y) and inventories of furniture fell 1.5% (+4.3% y/y). These declines were offset by higher electrical equipment inventories (11.3% y/y), higher inventories of computers (+8.4% y/y) and higher machinery inventories (8.7% y/y).

Total factory orders rose a firm 2.4% following a downwardly revised 1.2% November increase. Durable goods orders surged 2.9% which was little revised from the advance report of a 3.1% pop. Factory orders less transportation surged 2.2% (2.4% y/y) though nondurable are even y/y reflecting lower oil prices but also a decline in textiles.

Factory shipments surged 1.4% reflecting a 1.0% jump in durables which was broad based. Factory shipments less transportation jumped 1.0% (1.0% y/y).

Unfilled orders surged 2.1% due to the another jump in civilian aircraft (39.5% y/y). Less the transportation sector altogether backlogs rose 1.3% (13.8% y/y).

The Czech Republic and Kazakhstan released data on exports and imports of goods for December. The data for the Czech Republic are in Koruny and US dollars; that of Kazakhstan in US Dollars only. The monthly trade in goods when aggregated quarterly should equal the quarterly data reported in the balance of payments. The fact that they do not equal is probably due to differences in timing. The two series are, however, close as the high correlations between the two series indicate. (See the first two charts)

The monthly data for the Czech Republic suggest that the balance of payments data should show a sharp rise in the goods balance in the fourth quarter. The monthly data for Kazakhstan, on the contrary, suggest a sharp decline in the goods balance reported in the balance of payments.

Taking a somewhat longer look and including the balance on services, we find that the Czech Republic has traditionally had a deficit on goods and a surplus on services. It is just since late 2004 that the Republic has had a surplus on trade in goods (as can be seen in the third chart). Ever since mid 1999 Kazakhstan has had a surplus on trade in goods and a deficit on trade in services as seen in the fourth chart. Since mid 2002, the balance on goods has more than offset the deficit on services.