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 9/12/08 For Sep 2008 | ||||||||||||
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Highlights
Retail spending may be in the dumps but consumer confidence is definitely bouncing up, rising across many reports including this morning's mid-month consumer sentiment index from Reuters/University of Michigan -- at 73.1 vs. 63.0 in August for the biggest gain in nearly five years. Expectations are soaring, at 70.9 vs. 57.9 in August for the biggest monthly surge since the end of the 1991 recession! Consumers must believe that conditions, however weak, are bound to improve. Improvement in current conditions is less dramatic, at 76.5 for a still sizable 5.5 point gain. But the biggest plus of all, and one consistent with the drop in oil prices, is a steep decline in inflation expectations, down 1.2 points for the one-year outlook, now at a much more moderate 3.6 percent, and down 3 tenths for the five-year outlook to a nearly benign 2.9 percent. Treasury yields climbed in reaction to the report which does hint at stronger growth ahead.
The Reuter's/University of Michigan's Consumer sentiment index show consumer expectations coming off bottom, albeit cautiously. The Reuters consumer sentiment index in August rose nearly 2 points from July to 63.0. The expectations component rose more than the overall index but came off a very low base, jumping to 57.9 from 53.5 in July. The current conditions component slipped to 71.0 in August from 73.1 in July. There was modest good news on the inflation front as one-year expectations slipped 3 tenths to 4.8 percent, reflecting recent declines in gasoline prices. While July's report was encouraging in that overall sentiment may have bottomed, the index remains near record lows.
Consumer sentiment Consensus Forecast for preliminary September 08: 64.0
Range: 63.0 to 65.0
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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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