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 3/28/08 For Mar 2008 | ||||||||||||
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Highlights
The Reuters/University of Michigan consumer sentiment report showed only incremental weakness with a very welcome downtick in inflation expectations, results that won't upset the financial markets nor further darken the economic outlook. The headline index slipped to 69.5, down 1 point from mid-month and down 1.3 points from February. One-year inflation expectations slipped 2 tenths to a less elevated 4.3 percent with 5-year expectations unchanged at 2.9 percent.
Despite stability, these data like those from the Conference Board posted earlier this week are near all-time lows, matched only in prior recessions. Personal spending data released earlier this morning showed clear weakness in February while earlier this morning JC Penney said sales in March posted low double-digit declines. But if this is the worst of it, as indicated by this report, the economy may prove more resilient than expected. Stocks seemed to bounce on the report though other markets were little changed.
The Reuter's/University of Michigan's Consumer sentiment index was little changed in the mid-month reading for March with a very weak 70.5 versus 70.8 for February. Most importantly, one-year inflation expectations, in contrast to February's surprisingly soft CPI numbers, jumped 9 tenths to 4.5 percent, an extremely sudden and steep jump to a very elevated level. One mild offset is that 5-year inflation expectations slipped 1 tenth to 2.9 percent. The Fed needs consumer confidence to hold up, otherwise the risk of recession rises. At the same time, the Fed will be closely watching the inflation expectations numbers to see if expectations are staying "anchored" - a key issue in the Fed's monetary policy deliberations.
Consumer sentiment Consensus Forecast for final March 08: 70.0
Range: 69.5 to 71.0
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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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