U.S. Consumer Sentiment Down Unexpectedly

Consumer sentiment, according to the University of Michigan, fell this month. The preliminary sentiment index fell 4.2% m/m to 87.4 and compared to Consensus expectations for a roughly unchanged reading of 91.0.

During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending.

Lower consumer expectations led the decline with a 5.7% drop following the 1.6% January fall. The long term economic outlook deteriorated sharply as the index of expected business conditions during the next five years fell 8.8% (-15.3% y/y). The one year outlook for business conditions suffered as well with the index down 6.7% (-14.0% y/y) and expectations for personal finances slipped another 1.7% (-7.1% y/y).

The mean expected inflation rate for the next twelve months was about stable m/m at 3.7%, still well below the 5.5% expected in October & September.

The current conditions index declined 2.4% as the reading of personal finances fell 2.5% (-5.0% y/y) and of buying conditions for large household goods fell 1.8%. Consumers' assessment of gov't economic policy slipped m/m (-9.7% y/y).

The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.