After Plummeting From Record Highs, Consumer Confidence May Be Stabilizing
Consumer confidence has been in freefall over the past few months but signs point to the metric stabilizing in recent weeks. Morning Consult’s Index of Consumer Sentiment stood at 115.70 on February 10, the highest level ever observed by the research company, to a record low of 81.23 on April 7. And while the 29.8-point drop is six percentage points less than the average decline of the last five recessions, the speed of the contraction is unprecedented. However, index recovered some ground in the April 15 survey, hitting 83.57, where it has hovered around since.
Morning Consult attributes this recovery to an improvement in consumers’ expectations of the future and not their assessment of their present circumstances. In its survey, only 19 percent of consumers say they are best off financially now than they were 12 months ago, and 17 percent say now is a good time to make a major household purchase, both all-time lows. Looking ahead, however, the percentage of those responding to the survey who believe they will be worse off financially 12 months from now fell three points between April 6 and April 21, and stands at 19 percent. The percentage of respondents who believe they will be better off in 12 months also rose three points during that timeframe.
On April 8, the percentage of respondents who believed business conditions in the country as a whole would be worse off 12 months from now peaked at 48 percent. As of April 21, that had decreased to 46 percent. The share who believe it will be better 12 months from now climbed from 16 percent to 18 percent.
Longer-term, the shift in consumer expectations isn’t as pronounced. The share of consumers who believe the U.S. is in for periods of widespread unemployment and economic depression over the next five years has softened only one point to 55 percent. In Morning Consults’ analysis, a possible reason for the divergence between long-term and short-term expectations is their outlook on containing the virus. Personal finances and business conditions could improve within the year if the U.S. is able to perform widespread vaccinations, testing and contact tracing. However, many workers and businesses struggling to cover their costs can’t wait 12 months, and the survey results suggest respondents do not view improvements over the next year as sufficient to bring the economy out of recession.
For more on Morning Consults’ findings, click here.