Consumer Sentiment Reaches Five-year High
Although lower than the preliminary estimate, the University of Michigan Consumer Sentiment Index reached its highest level in five years.
The rise in consumer sentiment was the subject of just one of the many economic reports released on Wednesday as a result of the shortened Thanksgiving holiday week. Let’s take a look at four of the most important 
reports:
Although the preliminary reading of the Thomson Reuters/University of Michigan Consumer Sentiment Index for November was an impressive 84.9, the final reading was less exciting, despite the fact that it rose to a five-year high. The November CSI ticked upward to 82.7, from 82.6 in October.
From the report:
The Sentiment Index was 82.7 in November 2012, just above 82.6 in October, and well above last November’s 63.7. The Expectations Index and Current Conditions components moved in opposite directions. The Expectations Index slipped to 77.6 in November from 79.0 in October, while the Current Conditions Index rose to 90.7
in November from 88.1 in October. Both components were well above last November, with the Expectations Index posting more than twice the gain of the Current Conditions Index.
The Department of Labor’s weekly report on initial unemployment claims indicated a “less bad” advance figure of 410,000 new claims for the week ending November 17. Economists had been expecting a more modest decline to 415,000 new claims as a result of Hurricane Sandy. Jobless Claims Fell Sharply Last Week. Weekly unemployment claims are remaining above the 400,000 level, which we were attempting to break below at this time last year. The reports on initial unemployment claims are the best indicator of how little progress has been made in since the economic recovery began.
From the report:
In the week ending November 17, the advance figure for seasonally adjusted initial claims was 410,000, a decrease of 41,000 from the previous week’s revised figure of 451,000. The 4-week moving average was 396,250, an increase of 9,500 from the previous week’s revised average of 386,750.
Weekly Unemployment Claims at 410K: The Sandy Effect Continues
The Conference Board’s Leading Economic Index for October was a pleasant surprise. The October reading increased 0.2 percent to 96.0 after a revised 0.5 percent gain in September. Economists had been anticipating a decrease of 0.2 percent.
From the report:
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.2 percent in October to 96.0 (2004 = 100), following a 0.5 percent increase in September, and a 0.4 percent decline in August.
Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI increased slightly in October, the second consecutive increase. The LEI still points to modestly expanding economic activity in the near term. Over the last six months, improvements in the residential construction and financial components of the LEI have offset weak consumer expectations, manufacturing new orders and labor market components. Meanwhile, the coincident economic index also increased slightly in October.”
The November Flash (i.e. preliminary) U.S. Manufacturing Purchasing Managers’ Index from Markit Economics rose to 52.4 from 51.0 in October, in spite of economists’ expectations for a reading of 51.0. Markit is new to the United States region with its PMI data. The Institute for Supply Management has been the traditional authority for PMI reports in the United States.
From the report:
The Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) signalled the strongest improvement in U.S. manufacturing business conditions for five months in November. The preliminary ‘flash’ PMI reading, which is based on around 85% of usual monthly replies, rose to 52.4 from 51.0 in October to indicate a moderate manufacturing expansion overall.
* * *
Manufacturers reported a further rise in output during November, with a number of companies attributing this to larger volumes of new work. Moreover, production increased at the strongest rate since June, having quickened from the near stagnation recorded two months previously.
The major ETFs expected to respond to Wednesday’s economic reports are:
Industrial Select Sector SPDR Fund (NYSEARCA:XLI) +0.14%
Consumer Discretionary Select Sector SPDR Fund ETF (NYSEARCA:XLY) +0.34%
Consumer Staples Select Sector SPDR Fund ETF (NYSEARCA:XLP) +0.11%
Financial Select Sector SPDR Fund (NYSEARCA:XLF) +0.03%
Market Vectors Retail ETF (NYSEARCA:RTH) +0.34%
Bottom line: Despite the fact that the University of Michigan Consumer Sentiment Index for November did not remain at the level of the preliminary estimate, it rose to a five-year high. Although the Leading Economic Index and the Markit November PMI crushed expectations, the latest weekly report on initial unemployment claims served as a “reality check” revealing how slowly our economic recovery is progressing.
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