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Economy in Brief

Consumer Sentiment Grows Even More Glum
by Tom Moeller   September 17, 2010

In a renewed statement of discouragement, consumer sentiment fell again early in September. The University of Michigan reported that its mid-month reading reversed last month's uptick and fell to 66.6 which was the lowest level since August of last year. A level of 70.0 was the Consensus expectation. During the last ten years there has been an 88% correlation between the level of sentiment and the y/y change in real consumer spending.

The expectations index led this month's decline with a 6.0% m/m drop to 59.1 The reading for expected business conditions during the next year fell sharply from August (-33.0% y/y) as did expectations for business conditions during the next five years (-23.1% y/y). Expectations for personal finances slipped to the lowest since early-2009 (-7.8% y/y).

Expected price inflation during the next year fell m/m to 3.1%. However, the latest remained up from the December 2008 low of 1.7%. Respondents' view of government policy, which may eventually influence economic expectations, fell and reversed most of its August improvement. A lessened 16% of respondents thought that a good job was being done by government while an increased 41% thought a poor job was being done, the highest since early last year.

Sentiment about current economic conditions held roughly constant near the lowest level this year. The assessment of current personal finances ticked down m/m (+17.4% y/y). However, just 25% of respondents still thought their personal finances were in better shape than one year ago while 44% thought they were worse. Perceived buying conditions for large household goods, including furniture, refrigerators, stoves & televisions ticked up m/m (0.8% 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.

University of Michigan Mid-Sept. August July Sept. Y/Y 2009 2008 2007
Consumer Sentiment 66.6 68.9 67.8 -9.4% 66.3 63.8 85.6
   Current Economic Conditions 78.4 78.3 76.5 6.8 69.6 73.7 101.2
   Expectations 59.1 62.9 62.3 -19.6 64.1 57.3 75.6
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