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 2/15/08 For Feb 2008 | ||||||||||||
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Highlights
The Reuters/University of Michigan consumer sentiment index slowed abruptly in the mid-February reading, to 69.6 vs. 78.4 in January. The latest reading is the worst since the 1991 recession. Declines were posted for current conditions and especially for expectations which fell nearly 10 points to 59.4. The expectations index, a key reading that often leads the overall index, is also at its lowest point since the 1991 recession.
But perhaps the worst news is a nasty 3 tenth spike in one-year inflation expectations to 3.7 percent. Just yesterday, Ben Bernanke told lawmakers that inflation expectations remain "anchored." Increases in this reading, or the Conference Board's rival reading, will need to be addressed by policy makers. Five-year inflation expectations are unchanged at 3.0 percent.
The dollar eased in immediate reaction to the report, one which points to slowing consumer activity and rising inflation expectations. This report is very likely to push short Treasury yields and the stock market lower through the course of today's session.
The Reuters/University of Michigan's consumer sentiment index edged up in January to 78.4 from 75.5 in December. Consumer spirits have been holding up decently given the trouble in the jobs market, not to mention the depressed housing market and volatility in the financial markets. But further deterioration in equities and a rise in unemployment could be undermining confidence. However, inflation expectations held steady in January with the 12-month reading unchanged at 3.4 percent.
Consumer sentiment index Consensus Forecast for preliminary February 08: 77.0
Range: 70.0 to 80.6
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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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