While consumers appeared to be feeling better about the U.S. economy in January, media sentiment was at best mixed as the Dow Jones Economic Sentiment Indicator (ESI) for the month remained flat at 38.8, up only very slightly from December's 38.7. This represents the second consecutive weak performance for the ESI after relatively strong gains in October and November. The ESI's weakness runs counter to stronger than expected increases in two leading consumer-based economic indicators.

The University of Michigan Consumer Sentiment Index exceeded analyst expectations in January with an increase to 74.4 in January, its highest level in two years. The Conference Board's Consumer Confidence Index rose to 55.9, its highest measure since September 2008.

The Dow Jones Economic Sentiment Indicator aims to predict the health of the U.S. economy by analyzing the coverage of 15 major daily newspapers in the U.S. The University of Michigan Consumer Sentiment Index and the Conference Board's Consumer Confidence Index, use national surveys to measure consumer attitudes about the state of the U.S. economy.

While the ESI begins 2010 significantly higher than the 22.4 level it registered in January 2009, the weak performance of the past two months leaves the indicator below the level it held before the collapse of Lehman Brothers in September 2008.

"The ESI's second consecutive month of weak performance suggests the U.S. economy's recovery could be running out of steam after a solid rebound during the second half of last year, mirroring some recent economic activity surveys," Dow Jones Newswires 'Money Talks' columnist Alen Mattich said. "The ESI also suggests that we may see little change in nonfarm payroll employment for January when the Bureau of Labor Statistics releases its figures later this week."

The ESI represents one of the most comprehensive and far-reaching examinations of media coverage as an economic indicator. The ESI's back-testing to 1990 shows that the ESI clearly highlighted the risk that the U.S. economy was sliding into recession in 2001 and 2008 and suggests the indicator can help predict economic turning points as much as seven months in advance of other indicators.

Unlike some other indicators where 50 is a clear break-point between recession and recovery, the ESI needs to be read with reference to longer trends. Based on the ESI's performance since 1990, previous recoveries have been marked by substantial month-to-month gains, with a jump of three points seeming to be a sign of significant improvement. A drop below 50 marks the point at which there is a clear risk of a slowdown.