Economy

US Consumer Sentiment Improved in February, but Coronavirus Overhang Looms

Paul Ausick

The University of Michigan Consumer Sentiment Index rose from a January reading of 99.8 to February’s final level of 101.0. When the preliminary February index score was reported last month, the index reflected an increase to 100.9. Economists polled by Bloomberg were expecting a final February reading of 100.9.

The final index reading in February of last year was 93.8. The 7.7% year-over-year increase was primarily due to consumers’ views on the strength of the U.S. economy and their own personal financial situations.

Noting that the February score nearly matched the current expansion’s peak score of 101.4 set in March of 2018, the survey’s chief economist, Richard Curtin, commented, “The coronavirus was mentioned by 8% of all consumers in February when describing the reasons for their economic expectations. However, on Monday and Tuesday of this week, the last days of the February survey, 20% mentioned the coronavirus due to the steep drop in equity prices as well as the CDC warnings about the potential domestic threat of the virus.”

Curtin continued, “If the virus spreads into U.S. communities, consumers are likely to limit their exposure to stores, theaters, restaurants, sporting events, air travel, and the like. There is likely to be some advance buying and increased online shopping, but much of the discretionary spending may not occur. To be sure, there is no reason to anticipate that consumers will engage in such extreme measures at this time.”

The consumer expectations subindex rose month over month by 1.6 points, from 90.5 to 92.1 (up 1.8%), while the current conditions subindex increased from 114.4 to 114.8 (up 0.3%).

Year over year, the current conditions subindex improved by 5.8% and the consumer expectations subindex rose by 9.1%.

In closing, Curtin noted, “The most effective fiscal and monetary policies include proposed reactions to the virus that are transparent, well understood, and act to maintain confidence in government economic policies close to its nearly two-decade high.”

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