US Consumer Sentiment declines as Covid-19 cases surgeOn July 31, 2020 by Thomas Belayneh
The University of Michigan’s monthly survey of consumer confidence revealed lower confidence among consumers in July, as the headline sentiment index declined from 78.1 in June to 72.5 in July.
The last four months has seen stubbornly low levels in the headline sentiment index for which the average has been 73.7 – 25% lower than the same period last year. Following a six-year low recorded in April of 71.8, the jump observed in the headline index to 78.1 for June offered hope of a recovery in consumer sentiment.
This hope was quickly cast aside, however, as the renewed plunge in the data which tallies with the reversing of reopening measures led to the closure of bars and restaurants in several states.
The headline index is made up of two components – the current index (which measures consumers’ reading of the current economic climate) and the expectations index (which measures consumers’ assessment of the economic conditions for the twelve months ahead).
Both components of the headline index fell, with the current index component falling from 87.1 in June to 82.8 in July although it was well above its April nadir of 74.3.
The expectations index, however, painted a far bleaker picture. This component of the headline index fell from 72.3 in June to 65.9 in July, equalling the level recorded in May, which was a multi-year low.
So far, the federal relief programmes have been successful in preventing more substantial declines in consumer confidence, although today’s underwhelming report implies a future of prolonged weakness in consumer spending and a stalling of the US economic recovery, as the country grapples with a health crisis exacerbated by premature relaxing of movement restrictions.
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