There are two major organizations that measure consumer confidence on a monthly basis; The Conference Board and the University of Michigan’s Institute for Social Research (ISR). They both released their August surveys this week, which show consumer
confidence has not rebounded from their coronavirus lows.
Consumer confidence fell through the floor
The Conference Board published its latest data on Tuesday, which showed its Consumer Confidence Index (a combination of its Present Situation and Expectations Index) falling for the second month in a row and dropping below its recent low in April. After reaching a recent high of 132.6 in February, it fell to 85.7 in April due to Covid-19. The Index rebounded for two months to 98.3 in June but fell to 91.7 in July and deteriorated further to 84.8 in August, which is the lowest reading since May 2014.
Lynn Franco, Senior Director of Economic Indicators at The Conference Board said, “The Present Situation Index decreased sharply, with consumers stating that both business and employment conditions had deteriorated over the past month. Consumers’ optimism about the short-term outlook, and their financial prospects, also declined and continues on a downward path. Consumer spending has rebounded in recent months but increasing concerns amongst consumers about the economic outlook and their financial well-being will likely cause spending to cool in the months ahead.” To put some numbers behind Franco’s quote:
Present Situation (1985=100)
July: 95.9 (rebound high but not nearlyclose to February or March)
February: 108.1 (recent high)
June: 106.1 (rebound high and very close to February’s reading)
The Conference Board said the outlook for the labor market was also less positive, stating, “The proportion expecting more jobs in the months ahead declined from 29.6% to 29.1%, while those anticipating fewer jobs increased from 21.3% to 21.9%.” This is basically in-line with the slow jobs rebound as seen in unemployment claims.
Consumer sentiment is still in the dumps
The University of Michigan published its August survey results on Friday, which also shows consumer sentiment at levels not seen since 2004. Richard Curtin, Surveys of Consumers chief economist said, “Consumer sentiment has remained trendless in the same depressed range it has traveled in the past five months. The August figure of 74.1 posted an insignificant gain of just +0.4 Index points above the April to July average.”
February: 101.0 (recent high)
June: 78.1 (rebound high)
He added, “The small August gain reflected fewer concerns about the year-ahead outlook for the economy, although those prospects still remained half as favorable as six months ago. Although consumers anticipate that the economy will continue to improve, those gains will significantly slow by year-end without some additional spending programs to diminish the
hardships faced by unemployed workers, essential and small businesses, as well as support for state and local governments.”
Curtin added these remarks about a Covid-19 vaccine that will be critical to how soon the economy and consumer confidence can recover. He said, “Although an effective Covid-19 vaccine may be approved by year end, when most consumers can expect to be vaccinated is another issue that has thus far received little public attention.”
He added, “Priority lists are inevitable, and the difference between the first and last position is likely to be at least several months or even longer. A consensus on equitable treatment across the population is unlikely, which could prolong and enlarge discontent, and act to slow the pace of economic growth. While it is not advantageous for presidential campaigns to discuss this issue, it could form the last component of the negative impact of the coronavirus on the economy.” Source: Forbes Magazine.