Econoday Economic Report: Consumer Sentiment August 26, 2011

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Consumer Sentiment

Released On 8/26/2011 9:55:00 AM For Aug, 2011

	Prior	Consensus	Consensus Range	Actual
Sentiment Index - Level	54.9	56.0	51.5 to 57.0	55.7

Highlights
Just up from completely depressed is a fair way to describe consumer sentiment which bounced up from the bottom but only slightly in the last half of the month. The full-month sentiment index is 55.7 vs 54.9 at mid-month to imply over the last two weeks a 56.5 reading. A look back shows a 55 reading in November 2008 just after the Lehman-led bank meltdown. A 56 is seen in February 2009.

What improvement there is is in the leading component of expectations which rose 1.7 points from mid-month to 47.4. To find readings lower than this we have to go back to the Iranian hostage and oil crisis of the early 80s. The assessment of current conditions actually weakened further, to a final 68.7 for August vs 69.3 at mid-month. These levels were seen in late 2008 and early 2009. Other details include a one tenth uptick in one-year inflation expectations to 3.5 percent and no change in five-year expectations of 2.9 percent.

This report doesn't point to any burst in confidence following resolution of the debt-ceiling drama at the beginning of the month. Weak job growth and now volatility in the financial markets are keeping spirits down. On Tuesday next week the Conference Board will post the consumer confidence report.

Market Consensus before announcement
The Reuters/University of Michigan's consumer sentiment index for the mid-August reading plunged 8.9 points to 54.9 which is just below levels during the worst of the 2008 meltdown. This is nearly a record low, being the lowest reading since May 1980 during the period of the Iranian hostage crisis and 1980 recession. The expectations component, which is the leading component, fell 10.3 points to 45.7, a level that is severely depressed and near a record low. The current conditions component fell less severely, down more than six points to 69.3.

Definition
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. Preliminary estimates for a month are released at mid-month. Final estimates for a month are released near the end of the month. Why Investors Care

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.)

2011 Release Schedule

Released On: 1/14 1/28 2/11 2/25 3/11 3/25 4/15 4/29 5/13 5/27 6/17 7/1 7/15 7/29 8/12

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Released On: 8/26 9/16 9/30 10/14 10/28 11/11 11/23 12/9 12/22

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