Global| Aug 18 2006U.S. Consumer Sentiment Sagged
by:Tom Moeller
|in:Economy in Brief
Summary
Consumer sentiment in early August dropped sharply to the lowest level since last October, according to the University of Michigan. The 7.1% m/m decline in the sentiment index to 78.7 compared to consensus expectations for stability [...]
Consumer sentiment in early August dropped sharply to the lowest level since last October, according to the University of Michigan. The 7.1% m/m decline in the sentiment index to 78.7 compared to consensus expectations for stability at 84.0.
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 and during those ten years sentiment has a 68% correlation with the change in nonfarm payrolls.
Expectations for the economy posted a notable 11.0% m/m drop to the lowest level last October. The decline was led by a sharp decline in expected 12 month business conditions to the lowest level since September and a more moderate drop in expected conditions during the next five years. The expected change in personal finances also fell sharply to the lowest level since May. 
The reading of current economic conditions fell moderately for the second straight month. Details indicate that the index of current personal finances dropped to the lowest level since May but perceived buying conditions for large household goods slipped just modestly m/m (-4.3% y/y).
Consumers' opinion about gov't economic policy slipped a modest 2.4% m/m (-5.9% y/y) after sharp improvement during July. Expected inflation during the next year surged m/m to 4.9%, its highest level in nearly a year. The five to ten year expected rate of inflation also rose to 3.5%, its highest since May.
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 | August (Prelim) | July | Y/Y | 2005 | 2004 | 2003 |
|---|---|---|---|---|---|---|
| Consumer Sentiment | 78.7 | 84.7 | -11.7% | 88.6 | 95.2 | 87.6 |
| Current Conditions | 100.8 | 103.5 | -6.8% | 105.9 | 105.6 | 97.2 |
| Expectations | 64.5 | 72.5 | -16.1% | 77.4 | 88.5 | 81.4 |
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.
