Consumer sentiment rebounded in November, according to media reports of research at the University of Michigan.
The consumer sentiment index rose to 79.9 from 74.2 in October, reports said. The October sentiment level was the lowest in 13-years.
The increase in sentiment in November was well above the consensus forecast of Wall Street economists...
Despite the rebound, sentiment did not return to levels seen before Hurricanes Rita and Katrina struck the Gulf Coast and sent gasoline prices higher.
According to the report, current conditions improved sharply, while expectations only inched higher.
Short-term Inflation expectations improved as well:
It is true that inflation expectations, like expectations of general economic conditions, have not returned to their pre-hurricane levels. But the post-9-11 downward spike in inflation expectations took many months to fully reverse: Median expectations did not return to the pre-0/1 level until March 2002; mean expectations did not fully rebound until April. So the return to normalcy on the short-term outlook seems well an track.
For monetary policy purposes, of course, it is long-run expectations that matter most. On that front, the mean long-term outlook is improving aalong with short-term expectations, although the median -- probably a better guage because it is not contaminated by a small number of extreme responses -- remains slightly elevated. The change in median long-run expectations, however, was never that dramatic in the first place.
Side note: The last time I reported on the Michigan Survey results, James Hamilton argued that market-based measures are more reliable than household survey measures anyway. I don't disagree, so it is worth noting that those types of long-run inflation expectations measures never jumped substantially either.
For those who would like their own handy Power Point copy of the pictures above, here you go:
Download Inflation_expectations-Nov10.ppt