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Do 500 People Speak For The Whole Country?

July 12, 2007 by Scott Kinne

The University of Michigan Consumer Sentiment survey is not always an accurate predictor of consumer spending

On the week, mortgage rates are slightly improved as traders keep a watchful eye on tomorrow’s Retail Sales report.

Largely, markets want to know how Americans are using their disposable income. Are they buying big-ticket items like automobiles? Are they buying luxury items? Are they buying appliances and home goods?

Retail Sales is released at 8:30 A.M. ET Friday. Later that morning, markets will digest the University of Michigan Consumer Sentiment survey.

This report asks 500 consumers how they feel about the economy and their personal finances and extrapolates those answers to estimate how consumers are likely to spend in the future.

The UofM Survey is helpful, but not rock solid.

Since January 2007, the gauge has declined from 96.9 to last month’s 86.0 reading. That would foretell a slowdown in spending nationwide, but so far this year, that hasn’t been the case. People may know that they shouldn’t go spending, but they’ll often do it anyway.

Retail Sales are a better economic indicator because it measures facts and not feeling. Economists are expecting a flat reading tomorrow. If the number is on the weak-end, expect mortgage rates to fall.

Source
Reuters: Customer Zone – Reuters/University of Michigan Surveys
http://customers.reuters.com/community/university/default.aspx

Filed Under: Uncategorized

Scott Kinne

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