The University of Michigan Consumer Sentiment Index fell a final June reading of 78.1 to July’s final level of 72.5. The final index reading is 0.4 points below the preliminary July index of 72.9. Economists polled by Bloomberg were expecting a final July reading of 73.2. The final index reading in July of last year was 98.4.
Month over month, consumer sentiment fell by 5.6 index points, wiping out virtually all the gain recorded between May and June. The percentage decrease in the month-over-month scores was 7.2%, and the year-over-year decline was 26.3%.
The consumer expectations subindex decreased by 6.4 points month over month, from 72.3 to 65.9 (down 8.9%), while the current conditions subindex fell from 87.1 to 82.8 (down 4.9%).
Year over year, the current conditions subindex fell by 25.2% and the consumer expectations subindex dropped by 17.2%.
The survey’s chief economist, Richard Curtin, attributed the decline to the “continued resurgence of the coronavirus.” The drop in the current expectations subindex equaled the six-year low posted in May, indicating consumers do not expect the recession “to end anytime soon.”
Most of the July drop (4.9 index points to 73.2) occurred in the first half of the month. According to an April survey the University of Michigan, 60% of consumers’ said their top concern with the COVID-19 pandemic was the threat to their family’s health. Required social isolation or negative effects on their financial situation were the top concern for 20% of respondents.
Among consumers who rated health as their top concern, the consumer sentiment index score was 70.1. Of the 20% who said social isolation was their top concern, the index score was 83.1, and among the 20% most concerned with finances, the consumer sentiment index was 73.8.
Curtin also noted that the federal relief programs have “prevented more substantial declines in consumer finances” and that if these benefits are not continued, the most vulnerable Americans will be most “directly hurt.”
Thursday’s report on second-quarter gross domestic product showed that the U.S. economy had contracted by nearly a third and that consumer spending on restaurants, bars and other discretionary items declined sharply.
Friday’s report on June’s personal income and outlays showed a drop of 1.1% in income, along with a decline of 1.4% in disposable income. Personal consumption spending, however, increased by 5.6%, due to federal payments and the reopening of some businesses.