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 5/30/08 For May 2008 | ||||||||||||
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Highlights
Consumer sentiment held steady from mid-month, according to the Reuters/University of Michigan index which rose 3 tenths to 59.8. The index ended April at 62.6. The current conditions index rose 1.6 points from mid-month to 73.3, offsetting a 6 tenth decline in expectations that are at a dismal 51.1. All readings are the lowest since the early 80s.
Unfortunately inflation is this morning's theme, underscored by the prices paid index in the Chicago purchasers' report and reinforced by the Reuters/University of Michigan's 1-year inflation expectations reading which did not retreat from a stunning mid-month jump, holding at 5.2 percent for a nasty 4 tenths gain from April. Five-year expectations, at 3.4 percent, are up 1 tenth from mid-month and are 2 tenths higher from April.
Treasury yields fell in apparent reaction to the report which points to continued weakness for the consumer who, like business firms, is feeling the pinch of higher prices.
The Reuter's/University of Michigan's Consumer sentiment index hit a 28 year low in the preliminary report for May, dropping from 62.6 in April 59.5. Weakness was centered in the current conditions component which sank more than 6 points to 71.7. The expectations component slipped 1.6 points to 51.7, a low last seen in 1979. But of serious concern to Fed officials are inflation expectations, which spiked 4 tenths to 5.2 percent for the one-year outlook. The latest reading indicates that inflation expectations are starting to come unmoored - something that Fed officials indicate could make bringing inflation down difficult.
Consumer sentiment Consensus Forecast for final May 08: 59.5
Range: 58.5 to 61.2
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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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