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US consumer sentiment weak

February 01, 2010 | "Barron’s Econoday"

Consumer sentiment is still weak but is improving, adding to an upbeat morning for economic data. Reuters/University of Michigan consumer sentiment index rose 1.6 points to 74.4 in the final January reading vs. the mid-month reading of 72.8, a gain that points to month-end acceleration. Note a comparison of the mid-month reading against the final December reading of 72.5 indicates little movement in the early part of January.

Gains in the latest report are in the expectations component, the leading component now at 70.1 for a 2.6 point rise from mid-month to indicate a tangible easing in pessimism that hopefully is tied to hiring in the jobs market, recovery hinted at in this morning's Chicago purchasing report though not one supported by weekly jobless claims data. Inflation expectations are tame, unchanged at 2.8 percent one-year out.

Today's consumer sentiment is more upbeat than Tuesday's consumer confidence report from the Conference Board whose cut off date is the third week of the month. The Reuters/University of Michigan report suggests a late-month boost, perhaps one tied, if not only to employment, then to recent action in Washington including President Obama's memorable stand against bank risk.

Market Consensus Before Announcement

The Reuter's/University of Michigan's Consumer sentiment index was little changed in the mid-January reading, at 72.8 compared to December's final 72.5. Reflecting continued concern by households over high unemployment and few signs of hiring, the index has held in a very narrow and depressed range in recent months. Based on a recent rise in initial jobless claims and even a pullback in equities, sentiment could edge back down in the final reading for January

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