Consumer Sentiment Holds Steady

Ann Arbor, MI, September 28, 2007--Consumer sentiment remained unchanged in September, according to the Reuters/University of Michigan Consumer Sentiment Index.

“Consumers quickly tempered their reactions to the crisis in financial markets and a fear-induced free-fall in confidence was avoided," said Richard Curtin, the director of the Reuters/University of Michigan Surveys of Consumers.

"Over the past several months, however, consumers have become increasingly concerned about falling home prices.

While these concerns are not expected to spark an economy-wide recession, consumers are anticipated to become more cautious spenders in the year ahead. Overall, the pace of growth in real personal consumption is expected to slow to 2% over the next four quarters, with some quarters weaker than this average, especially around the turn of the year,” Curtin noted.

The Index of Consumer Sentiment was 83.4 in the September 2007 survey, identical to the August level, and just below the 85.4 recorded in September of 2006. This is the third year that the average of the August and September levels of the Sentiment Index have been nearly identical.

One-in-four homeowners reported in the September survey that they thought the market value of their home had recently declined, and one-in-five homeowners anticipated the market value of their home would decline during the year ahead.

“Home prices were judged less favorably than anytime in nearly two decades, including the housing slump in the early 1990's,” Curtin said. Recent declines in home prices were concentrated in the West and Northeast.

“Although consumers were slightly more upbeat about job prospects in September than in August, consumers nonetheless expected the unemployment rate to rise just above 5% during the year ahead,” Curtin explained.

High food and fuel prices remained a top concern of consumers, especially families with income of under $50,000.

Higher income households voiced relatively greater concerns about the falling value of their homes. The

average homeowner expected the value of their home to increase by just 0.4% during the year ahead, down from the already greatly reduced level of 2.5% six months ago.