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Economy in Brief

U.S. Consumer Sentiment Improves Just Slightly This Month
by Tom Moeller August 13, 2010

Consumers recovered slightly this month from their gloomy state during July, but not by much. The mid-month August reading of consumer sentiment, as measured by the University of Michigan, recovered a quarter of the July drop with an increase to 69.6. The latest was the lowest reading since November but up still by one-quarter from the 2008 low. During the last ten years there has been an 89% correlation between the level of sentiment and the y/y change in real consumer spending.

The expectations index improved m/m to 64.1. The readings for expected business conditions during the next year rose (0.0% y/y) and expectations for business conditions during the next five years (2.5% y/y) recovered most of their July decline. Expectations for personal finances fell further to the lowest since early-2009 (-5.4% y/y).

Expected price inflation during the next year ticked up slightly to 3.4% and remained up from the December 2008 low of 1.7%. Respondents' view of government policy, which may eventually influence economic expectations, improved sharply to their highest since November. An increased nineteen percent of respondents thought that a good job was being done by government while a lessened 36% who thought a poor job was being done.

Sentiment about current economic conditions also improved slightly but remained near the lowest level this year. The assessment of current personal finances rose sharply (37.9% y/y) but perceived buying conditions for large household goods, including furniture, refrigerators, stoves & televisions held roughly steady m/m (8.0% y/y).

The Reuters/University of Michigan survey data are not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end. The summary indexes are in Haver's USECON database with details in the proprietary UMSCA database.

Consumer sentiment, the economy, and the news media. This 2004 article is from the Federal Reserve Board of Governors can be found here  here.

University of Michigan Mid-August July June August Y/Y 2009 2008 2007
Consumer Sentiment 69.6 67.8 76.0 5.9% 66.3 63.8 85.6
   Current Economic Conditions 78.3 76.5 85.6 17.6 69.6 73.7 101.2
   Expectations 64.1 62.3 69.8 -1.4 64.1 57.3 75.6
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