Wednesday, November 17, 2010

USA Consumer Sentiment at 5-Month High (Chart) "Spending will continue close to current rate"


Thomson Reuters/University of Michigan: USA Consumer Sentiment Lowest Since July 2010

USA Consumer Sentiment at 5-Month High

Official Statement (Reuters, November 12) - The Thomson Reuters/University of Michigan's preliminary November reading on consumer sentiment came in at 69.3, up from 67.7 in October and slightly higher than the median Reuters forecast of 69.0. The reading on the overall index was just above the 68.2 average of the last four months but below the post-recession high of 76.0 from June, according to the report. "The slight improvement in sentiment suggests that spending will continue at close to its current rate through Christmas, which is better than expected even a few months ago. But it's not going to be enough to make a material dent in the unemployment rate," said Christopher Low, chief economist at FTN Financial in New York.

Cycle History Consumer Sentiment in November (preliminary) is down -27.6 and -28.5% from the intermediate-term peak of 96.9 in January 2007. In 2004 the index was greater than 100. The current sentiment is up +14.0 and +25.3% from the bottom of 55.3 in November 2008 (the all-time low). Therefore, the current sentiment is closer to the cyclical trough than peak.

Trend Consumer Sentiment plunged in July 2010 to 67.8 from 76.0 in June (-8.2). Previously, sentiment had been above 70.0 since December 2009 - seven consecutive months. This plunge negated the +7.8 increase in September 2009. Current sentiment (preliminary) of 69.3 is below the 12-month moving average but above the  24-month, and 36-month moving averages of 71.5, 68.4, and 67.2, respectively. (The 12-month, 24-month, and 36-month moving averages charts are not shown on this page).

Chart (Consumer Sentiment) Below is a chart of the latest 47 months of the Reuters/University of Michigan Index of Consumer Sentiment from January 2007 through the latest month reported, October 2010 (preliminary). As can be seen, the last sentiment peak was in January 2007 at 96.9, at the beginning of the chart, a decline ensued, and the bottom was in November 2008 at 55.3 (which also was an all-time low). The latest sub-peak was in June 2010 at 76.0. A change in trend to the downside then occurred. (This preliminary data will be updated to the revised data on the chart later this month, without a subsequent post.

Commentary The Reuters/University of Michigan Index of Consumer Sentiment at 69.3 (preliminary) for November is below the recent June 2010 peak of 76.0 and well below the January 2007 intermediate-term peak of 96.9. Current sentiment improved, which is encouraging. Gallup reported on November 9, "U.S. Economic Confidence Improves to Match 2010 High" and "Consumers are more optimistic about economy now than they were a year ago". The Conference Board will report their monthly Consumer Confidence Survey at the end of this month.

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