US Consumer Sentiment Plunged in March on COVID-19 Fears
The University of Michigan Consumer Sentiment Index rose month over month from a February reading of 101.0 to March’s final level of 89.1. When the preliminary March index score was reported earlier this month, the index reflected a decrease to 95.9. Economists polled by Bloomberg were expecting a final March reading of 92.0.
The final index reading in March of last year was 98.4. Month over month, consumer sentiment declined by 11.9 index points, the fourth-largest drop in nearly 50 years. The month-over-month percentage drop in the index was 11.8% and the year-over-year decline was 9.5%.
Noting that the massive decline in the index, the survey’s chief economist, Richard Curtin, commented, “If the Consumer Sentiment Index were to stabilize at its most recent seven-day average, it would imply an additional decline of nearly 18.2 Index points in April, which would amount to a record-setting two-month decline of 30.1 points.”
Curtin continued, “Stabilizing confidence at its month’s end level will be difficult given surging unemployment and falling household incomes. The extent of additional declines in April will depend on the success in curtailing the spread of the virus and how quickly households receive funds to relieve their financial hardships. Mitigating the negative impacts on health and finances may curb rising pessimism, but it will not produce optimism.”
Month over month, the consumer expectations subindex tumbled by 12.4 points from 92.1 to 79.7 (down 13.5%) while the current conditions subindex decreased from 114.8 to 103.7 (down 9.7%).
Year over year, the current conditions subindex fell by 8.2% and the consumer expectations subindex dropped by 10.2%.
In closing, Curtin noted, “To avoid an extended recession, economic policies must quickly adapt to a new era that will reorder the spending and saving priorities of consumers as well as the relative roles of the public and private sectors in the U.S. economy.”
The COVID-19 outbreak in the United States is hitting some areas of the economy with overwhelming force. However, there are also some sectors at risk that are ordinarily considered safe.