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September 12th, 2008

Consumer Sentiment Index: Highest Level Since January



The University of Michigan Consumer Sentiment Index increased to 73.1 in September, its highest level since the beginning of this year. September’s number was the largest monthly increase in four years. Falling oil prices were the main proponent behind the increase. Confidence has steadily improved since June:

Consumers finally decided that lower energy prices are here to stay and responded with a burst of improved sentiment. Confidence in early September surged over 10 points from its August average and about 8 points from the second half of August. (Our estimate of the index for the second half of the month derived from statements in past press releases that about three-fifths of the total monthly sample is included in the preliminary report.) This was the largest jump in confidence since 2004 and was led by the biggest jump in the expectations component since the end of the 1990-1991 recession. With its emphasis on consumer finances, the strong response to lower energy prices in the Michigan index is not surprising. Historically, it has been very sensitive to movements in stock and gasoline prices.

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