U.S. Personal Spending IncreasesAgain, Modestly

As reported mid-month, consumers' moods have stabilized as suggested by the University of Michigan. It reported that the full month March reading of consumer sentiment held stable in the range of the last several months. Despite this stability, however, the latest figure was down 17.6% from last March. During the last ten years, there has been a 63% correlation between the level of sentiment and the three-month change in real personal consumption expenditures. The March reading came in slightly above Consensus expectations.

The expectations component of consumer sentiment firmed a bit and recovered nearly half of the February decline. Expectations for business conditions during the next year led that increase but remained near the lowest level since 1980.  Expectations for conditions during the next five years fell slightly to the lowest level since last June.

The expected change in personal finances ticked higher.

The current economic conditions index also improved slightly from February after an initial reading of sharp decline. Buying conditions for large household goods fell just slightly m/m but they remained down 21.0% from a year earlier. The view of current personal finances also fell and remained down by one-half from early 2007.

The opinion of government policy, which may eventually influence economic expectations, improved sharply to the highest level since January of 2007. Twenty two percent of respondents thought that a good job was being done by government, up from the four percent low of last December, while a much reduced twenty eight percent thought that a poor job was being done.

Inflation expectations for the next year were about stable at 2.4%. They were as high as 7.0% last May. The range of expectations is from slight price deflation to a 5.3% increase in prices. The expected inflation rate during the next five years reversed most of the increases during the last two months and fell to 2.9%.

The University of Michigan survey data 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.

Payments Fraud: An Introduction from the Federal Reserve Bank of Chicago is available here. 

Egad! Still very weak: Euro industrial orders continued their steep rate of decline in January. The 3.4% mo/mo drop was less than the 8% plunge in December and the 9.4% stunner in November, but it fell far short of being reassuring.

Weak Q1 in train, too: The three month pace of decline is 57% at an annual rate. The rate of decline in the quarter is also at a -50% annual rate. So 2009-Q1 is not an encouraging number to look forward to at this point.

Imported weakness for Europe: The domestic/foreign split for orders is somewhat illuminating. Domestic orders fell at by 3.9% from December. Foreign orders fell by 7.3%. The pace of decline for past growth rates also shows that the domestic rate of decline has lagged the pace of the foreign orders decline. But that growth gap has become more pronounced this month with domestic orders off by so much less than foreign orders. Clearly the EMU is importing weakness from abroad. Its foreign orders and exports are falling at a faster pace than its domestic activity.

Dissent at home: While the ECB is coming under more criticism from business groups (today it is Business Europe, which represents national business federations and industry groups) the industrial orders data strongly suggest that the pulse of weakness is from beyond the ECBs border and reach. That does not mean that the ECB or that fiscal stimulus could not make up for it, but that there is a continuing drag of controllable influence on the euro-economy.

A glint or two of good news: Still, it is encouraging that the Markit PMI indices for services and for MFG turned higher in March. Today the CEPR index of activity echoed that signal and turned just a little bit less negative in March compared to February. This sort of statistic is not bankable but it is indicative of an economy that may be passing from its most severe phase of negative growth to a milder phase and perhaps eventually headed to recovery.

Looking ahead to March data… For the bulk of Euro-data the readings remain dispirited and grim. But the March reports which are so few in number have begun to stake out a less negative view. There it is: the precursor to a positive view. Not to get too excited yet, but this is the way that the rebound will start. So despite the discouraging data on the day the there is some good news in train but it’s only found in the freshest of reports. That means we are apt to see better news for COUNTRY level data first, since the EMU reports lag the timeliest of national reports.