The University of Michigan's Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending. Consumer confidence and consumer sentiment are two ways of talking about consumer attitudes. Among economic reports, consumer sentiment refers to the Michigan survey while consumer confidence refers to The Conference Board's survey. Why Investors Care
| Released on 9/28/07 For Sep 2007 | ||||||||||||
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Highlights
Unlike the Conference Board's report on Tuesday, today's consumer sentiment report from Reuters/University of Michigan will not deepen concerns over consumer spirits. The September index was unchanged from August at 83.4, though it is down a bit from mid-September's 83.8 reading. The index came down in August from July's 90.4 level, a reflection of high gas prices and, no doubt, the turmoil that has shaken the banking sector. But readings the last two months aren't that much lower than June's 85.3 level.
Another plus in the report is tame readings on inflation expectations, a topic often cited by Federal Reserve officials. Twelve-month expectations dipped back 1 tenth to 3.1 percent with five-year expectations unchanged at 2.9 percent. Eighty dollar oil has not shaken the consumer. Stable inflation expectations will give the Fed more leeway to go ahead and lower interest rates further.
Markets showed surprisingly little reaction to the report, at least initially. But the report is a plus for the economic outlook, suggesting that consumers may not be so badly shaken by all the bad news that's been sweeping the business pages.
The Reuter's/University of Michigan's Consumer sentiment index actually improved in mid-September, edging up to 83.8 from August's final reading of 83.4. The assessment of current conditions, an important sub-index for an indication on public reaction to the subprime mess, was little changed at 98.3 vs. 98.4 in August. Given that confidence means much for maintaining consumer spending, the markets will be watching to see if the consumer sector has put much of the financial turbulence of August behind it and whether the Fed's interest rate cut is boosting confidence. However, it may be October before we see the full impact.
Consumer sentiment Consensus Forecast for final September 07: 84.3
Range: 82.7 to 85.0
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Consumer sentiment is mainly affected by inflation and employment conditions. However, consumers are also impacted by current events such as bear & bull markets, geopolitical events such as war and terrorist attacks. Investors monitor consumer sentiment because it tends to have an impact on consumer spending over the long run (although not necessarily on a monthly basis.) |
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