Global| Nov 26 2008Michigan Consumer Sentiment Reading Lowest Since 1980
by:Tom Moeller
|in:Economy in Brief
Summary
The University of Michigan's reading of consumer sentiment for the full month of November was worse than at mid-month. The full month index fell to 55.3 from the mid-month read of 57.9 and from 57.6 for October. The latest level was [...]
The University of Michigan's reading of consumer sentiment for the full month of November was worse than at mid-month. The full month index fell to 55.3 from the mid-month read of 57.9 and from 57.6 for October. The latest level was the lowest since early-1980 and it was lower than Consensus expectations for a reading of 57.7.
During the last ten years there has been a 55% correlation between the level of sentiment and the three-month change in real consumer spending.
The view of current personal finances fell to a record low level, off by nearly one half from last year's average. Sixty one percent of respondents indicated their finances were worse off than last year, a record high. The index of buying conditions for large household goods fell sharply to the lowest since 1980. Most (54%) indicated that now was a bad time to buy because of a heightened sense that times were bad and that more bad times lay ahead.
The expectations component of consumer sentiment was down further than reported at mid-month. A 5.3% m/m November decline came on top of the 15.2% October drop. The figures were, however, slightly above the lows reached this past Spring. Expectations for business conditions during the next years fell to their lowest since July and expectations for conditions during the next year fell as well. The expected change in personal finances improved slightly.
The opinion of government policy, which apparently influences economic expectations, remained about unchanged from October (-37.8% y/y). Only a slightly improved six percent of respondents thought that a good job was being done by government while 55% thought a poor job was being done. That was near the highest percentage on record.
Recent economic weakness and lower oil prices caused inflation expectations to fall. The mean expected rate of inflation during the next year plummeted to 2.9% from 4.3% last month. It was as high as 7.0% in May. The expected inflation rate during the next five years was stable at 3.1%, near the lowest level since 2003.
The University of Michigan survey 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 | November | Mid-November | October | September | November y/y | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|---|---|
| Consumer Sentiment | 55.3 | 57.9 | 57.6 | 70.3 | -27.3% | 85.6 | 87.3 | 88.5 |
| Current Conditions | 57.5 | 61.4 | 58.4 | 75.0 | -37.2 | 101.2 | 105.1 | 105.9 |
| Expectations | 53.9 | 55.7 | 57.0 | 67.2 | -18.6 | 75.6 | 75.9 | 77.4 |
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
