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 3/14/08 For Mar 2008 | ||||||||||||
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Highlights
The University of Michigan's consumer sentiment index was little changed in the mid-month reading, at a very weak 70.5 vs. 70.8 for February. Most importantly, one-year inflation expectations, in contrast to today'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. Given uncertainty surrounding the Bear Stearns liquidity announcement, the markets did not react to this report, at least initially. But the spike in inflation expectations is deepening the headaches at the Federal Reserve.
The Reuter's/University of Michigan's Consumer sentiment index has been pointing to notable slippage in consumer confidence - a factor which may play a key role in deciding whether the economy slips into recession or not. And we are getting different signals from different reports on consumer confidence. The Reuters/University of Michigan reading slipped to 70.8 at the end of February from 78.4 in January. This drop is less severe than the rival measure from the Conference Board. A big positive in the report is a 1 tenth dip in one year inflation expectations, though at a still elevated 3.6 percent. The dip back does suggest that price increases currently underway at the pump are not scaring consumers, who perhaps and hopefully are patiently adapting themselves to the problem. But the latest run up in oil prices could lead consumers to revert back to worrying about gasoline prices and inflation overall.
Consumer sentiment Consensus Forecast for preliminary March 08: 69.5
Range: 65.0 to 71.5
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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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