Consumer Confidence Tumbled In April; Short-Term Outlook Somewhat Optimistic
Consumer sentiment took a significant plunge in April as the COVID-19 pandemic spread and measures to control it reverberated through the economy. The Conference Board reports that its Consumer Confidence Index deteriorated further in April, following a sharp decline in March. The Index now stands at 86.9, down from 118.8 in March.
The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, also posted a substantial drop in April, from 166.7 in March to 76.4. However, the Expectations Index, which is based on consumers’ short-term outlook for income, business and labor market conditions, improved from 86.8 in March to 93.8 in April.
“Consumer confidence weakened significantly in April, driven by a severe deterioration in current conditions,” says Lynn Franco, senior director of economic indicators at The Conference Board. “The 90-point drop in the Present Situation Index, the largest on record, reflects the sharp contraction in economic activity and surge in unemployment claims brought about by the COVID-19 crisis. Consumers’ short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at-home restrictions will loosen soon, along with a re-opening of the economy. However, consumers were less optimistic about their financial prospects and this could have repercussions for spending as the recovery takes hold. The uncertainty of the economic effects of COVID-19 will likely cause expectations to fluctuate in the months ahead.”
Consumers’ appraisal of current conditions declined considerably in April. Those claiming business conditions are “good” decreased from 39.2 percent to 20.8 percent, while those describing business conditions as “bad” increased from 11.7 percent to 45.2 percent—nearly half those surveyed. Consumers’ assessment of the job market also eroded significantly from the previous month. Those saying jobs are “plentiful” decreased from 43.3 percent to 20 percent, and those claiming jobs are “hard to get” increased from 13.8 percent to 33.6 percent.
Consumers, however, were somewhat optimistic about the short-term outlook. The percentage of consumers expecting business conditions to improve over the next six months increased from 18.7 percent to 40 percent, however, those expecting business conditions to worsen also increased, from 16.4 percent to 25.7 percent.
Consumers’ outlook for the labor market was mixed. The proportion expecting more jobs rose from 16.9 percent to 41 percent, while those anticipating fewer jobs in the months ahead also increased, from 17.6 percent to 20.8 percent. Regarding their short-term income prospects, the percentage of consumers expecting an increase in jobs declined from 20 percent to 16.7 percent, while the proportion expecting a decrease in jobs rose from 10.1 percent to 18.5 percent.