Covid-19 cases are on the rise again, and U.S. consumer sentiment already may be reflecting concerns over the pandemic’s resurgence.
An Aug. 13 preliminary reading of The University of Michigan’s gauge of consumer sentiment showed that confidence is now below the April 2020 low of 71.8, representing also the lowest reading since 2011. The University’s Index of Consumer Sentiment was at 70.2, a 13.5 percent decline from July’s 81.2 reading.
According to Richard Curtin, the University’s chief economist for its Surveys of Consumers, “Consumers reported a stunning loss of confidence in the first half of August.”
The losses in early August were “widespread across income, age, and education subgroups and observed across all regions. They also covered all aspects of the economy, from personal finances to prospects for the economy, including inflation and unemployment,” he said.
Past data indicated that the Index of Consumer Sentiment has only recorded larger losses in six other surveys over the past half century, and they’ve all been connected sudden negative changes in the economy. Examples include the shutdown of the U.S. economy in April 2020, when the reading fell 19.4 percent, and at the depths of the Great Recession in October 2008, when it was down 18.1 percent.
Essentially, consumers are presuming that the rise in cases connected to Covid’s Delta variant will mean that the economy will decline over the next several months. Presumably, sentiment will shift again toward optimism once there is a sense of control over the Covid variant. When that might occur isn’t clear.
The University’s final reading for August is set for Aug. 27. The Conference Board’s more closely followed consumer confidence reading is set for Aug. 31.
However, news on the confidence front might not be all bad.
On Thursday, Labor Department data showed that first-time claims for unemployment benefits fell for the fourth straight week. The number who claimed benefits for the first time fell 29,000 to 348,000, below the 365,000 economists expected.
With first-time filings on the decline, there is hope that the jobs market is on the mend. An improving jobs picture is often considered a sign that the economy is turning the corner.
In reporting second-quarter results this week, Macy’s, Kohl’s, and The TJX Cos. Inc. all raised guidance for the back half of the year, with favorable back-to-school sales powering a strong start to Q3.