Michigan Consumer Sentiment Sags Once Again

Consumer sentiment declined again in early November, falling from October's 70.6 to 66.0, measured by the Reuters/University of Michigan Index of Consumer Sentiment.  Forecasters had looked for only a marginal decrease to 70.0.

The reading on expectations for mid-November was down 4.9 points to 63.7 from October's 68.6. The primary weakness came in survey participants' outlook for business conditions over the next year.  That had leaped to 88 in September and then fell back in October to 81 and now to 67.  This move seems to show that the nice rise in September was a temporary blip, reversed last month and again now.  Indeed, November's expectations for "times" to be "good" fell by 7 points and those for "times" to be "bad" increased by 7 points from October's amounts.  Expected personal finances were also less optimistic, decreasing by 6 points in this survey round after a 2-point uptick last month.  The latest move was related to a rise in the number of people who expect their income to fall during the coming year.

The reading of current economic conditions also fell; it went down 4.1 points from October to mid-November.  People's assessments of their current financial condition and business conditions in general both moved adversely.  In particular, more respondents indicated that current "bad times" make this a "bad time" to buy large consumer items.  At 21, this reading was up 3 points in the month and returned to its level back at the beginning of this year.  The record high for this negative indicator is 24, reached in August 2008. Prior to this cycle, the record was 17 in October 1992.

Expected price inflation during the next year amounted to 3.3% in this mid-November survey, according to the mean of participants' estimates, edging up from October's 3.2%.  In contrast, the median of those estimates ticked down from 2.9% to 2.8%, suggesting that people see little overall change in price pressures this month.

Respondents' views on government policy, which may eventually influence economic expectations, showed mixed developments in this current survey.  The number expressing a favorable opinion rose from 86% in October to 88%, reflected in a like increase in the number believing government is doing "a good job" in November.  At the same time, the open-ended query about news reports people have heard gave a negative spin to their impressions of government; the number hearing favorable news about government fell from 6% last month to 3% and the number hearing unfavorable news increased from 7% to 11%.  While this latter "news" reading has hardly ever been positive on a net basis, the current -8 is well above averages between -3.5 and -4.  So people are clearly uneasy about the news they're getting on government even though they're feeling marginally better about how government is working in the economy.

The Reuters/University of Michigan survey data are not seasonally adjusted. The reading is based on telephone interviews with about 500 households at month-end.  These mid-month results are based on about 320 interviews. The summary indexes are in Haver's USECON database with details in the proprietary UMSCA database.p