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Consumer Sentiment Stumbled in Late June as Virus Spread

Consumer Sentiment Stumbled in Late June as Virus Spread
(Andrii Yalanskyi/Dreamstime)

Friday, 26 June 2020 10:20 AM

U.S. consumer sentiment stumbled in late June from earlier in the month as coronavirus cases started to climb again in various states.

The University of Michigan’s final sentiment index fell to 78.1 from a preliminary reading of 78.9, according to data Friday. Compared with a month earlier, the gauge posted its largest advance since late 2016. The median projection in a Bloomberg survey of economists called for a final June reading of 79.2.

The gauge of current conditions was 87.1 following a preliminary reading of 87.8 -- though still up from 82.3 in May. The expectations index eased to 72.3 from an initial 73.1 and compared with 65.9 in May that was the lowest since 2013.

The improvement from May points to gradually growing optimism that the economy will recover as jobs are restored and help slowly rekindle the demand needed for the U.S. to emerge from the recession. At the same time, the sentiment gauge is well below pre-pandemic levels, highlighting consumers’ lingering anxiety about the prospects for the economy and employment against the backdrop of the coronavirus.

“Until we get consumers to view their future prospects with more optimism, we can expect that the gains in spending will be modest over the next six to nine months, and more than that, they’ll be volatile,” Richard Curtin, director of the survey, said on a Bloomberg conference call. “I think we’re going to see it below the levels that we would have expected on a V-shaped recovery for a good long time.”

The report showed that sentiment rose just 0.5 point in the South and 3.3 points in the West, regions where coronavirus cases have been increasing. In the Northeast, where spread has been limited, confidence jumped by the most on record, the university’s data showed.

Covid-19 cases have increased in states including Texas, Florida, North Carolina and California, raising the possibility of a second round of shutdowns. On Thursday, Texas Governor Greg Abbott warned about a sharp spike in cases and halted the state’s phased reopening.

Stocks fell and Treasuries rose on Friday as a resurgence in new virus infections threatened to halt progress on reopening the American economy.

Government Relief

Overall confidence in government economic policies dropped in June to the lowest level since President Donald Trump entered office, which may underscore the need for additional relief programs from lawmakers.

Assessments of current finances remained near the lows recorded since April, with the share of consumers saying their finances were improved still 19 percentage points below the February peak. Reports of income gains fell to just 28% in June, the smallest proportion of consumers in six years.

An earlier report on Friday showed consumer spending surged by a record in May but remained below pre-pandemic levels as Americans spent relief payments and ventured out of their homes to newly reopened stores and restaurants.

The Michigan survey was conducted May 27 to June 22, and the preliminary results cutoff was June 10.

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U.S. consumer sentiment stumbled in late June from earlier in the month as coronavirus cases started to climb again in various states.
consumer, sentiment, economy, virus, michigan
Friday, 26 June 2020 10:20 AM
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