The preliminary Sept U of Michigan confidence figure was 70.2, almost 3 points higher than expected and is up from 65.7 in Aug and is the 2nd highest reading going back to Sept ’08. Current Conditions rose 5.2 points to 71.8 to the most since June and the Outlook rose by 4.2 points to 69.2, also the highest since June. Since the Nov low both components are up by similar amounts but since Dec, Current Conditions are up just 2.3 points while the Outlook has risen by 14.2 points. One year inflation expectations fell .2% to 2.6% but 5 year expectations rose .1% to 2.9%. The biggest factor in ones confidence in the economy has to do with the labor market and we’ve surely seen a slowing rate of deterioration and that is being reflected in the confidence figures. However, there is still a ways to go before the less bad gets good as confidence in the prior recession bottomed at 77.6.
July Wholesale Inventories fell a greater than expected 1.4%, .4% more than the consensus and June was revised lower by .4%. Because sales rose .5%, the inventory to sales ratio fell to 1.23, the lowest since Oct ’08 but still remains well off its record low of 1.11 in June ’08. Inventories were cut by 2% in the auto sector but due to the clunker program and 2nd half ramp up in auto production that will reverse. The hoped for inventory recovery did not show up in today’s data which makes up about 25% of business inventories but it will in coming months with the matter of degree and sustainability being the main question with final demand still muted.