Global| Dec 08 2006U.S. Consumer Sentiment Fell on Diminished Expectations
by:Tom Moeller
|in:Economy in Brief
Summary
The University of Michigan's preliminary reading of consumer sentiment this month fell 2.1% from November to 90.2. The decline followed a 1.6% November drop and compared to Consensus expectations for a slight increase to 92.5. During [...]
The University of Michigan's preliminary reading of consumer sentiment this month fell 2.1% from November to 90.2. The decline followed a 1.6% November drop and compared to Consensus expectations for a slight increase to 92.5.
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 and during those ten years sentiment has a 68% correlation with the change in nonfarm payrolls.
Diminished consumer expectations for the economy dragged the December figure down with a 5.5% decline after a 1.9% November shortfall. Business conditions during the next twelve months led that decline with a 13.4% (-6.7% y/y) drop while long term expected business conditions also fell as did expected personal finances.
The reading of current economic conditions actually rose 2.1% and reversed the 1.2% November drop. Perceived buying conditions for large household goods led that m/m increase (-1.2% y/y) but the sense of current personal finances fell (-0.8% y/y).
Expected inflation during the next year increased to 3.5% and for the next five years expected inflation ticked up to 3.6%. Since 1980 there has been an inverse 63% correlation between the level of sentiment and expected inflation during the next year.
Consumers' opinion about gov't economic policy sagged miserably to an index reading of 86 and reversed all of November's increase.
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.
| University of Michigan | December (Prelim. | November | Y/Y | 2006 | 2005 | 2004 |
|---|---|---|---|---|---|---|
| Consumer Sentiment | 90.2 | 92.1 | -1.4% | 87.2 | 88.6 | 95.2 |
| Current Conditions | 108.2 | 106.0 | -0.8% | 105.1 | 105.9 | 105.6 |
| Expectations | 78.6 | 83.2 | -2.0% | 75.7 | 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.
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