US consumer sentiment deteriorates amid Covid-19 resurgence
By Michele Maatouk
Date: Friday 17 Jul 2020
(Sharecast News) - Consumer sentiment in the US deteriorated in July amid a rise in new coronavirus cases, according to preliminary data released on Friday.
The University of Michigan consumer sentiment index fell to 73.2 from 78.1 in June and 98.4 in July last year. The reading was below consensus expectations of 79.0.
The current economic conditions index came in at 84.2 in July compared to 87.1 the month before and 110.7 in the same month a year ago.
The index of consumer expectations printed at 66.2, down from 72.3 in June and versus 90.5 in July 2019.
Surveys of Consumers chief economist, Richard Curtin, said: "Consumer sentiment retreated in the first half of July due to the widespread resurgence of the coronavirus. The promising gain recorded in June was reversed, leaving the sentiment index in early July insignificantly above the April low (+1.4 points).
"Following the steepest two-month decline on record, it is not surprising that consumers need some time to reassess the likely economic impact from the coronavirus on their personal finances and on the overall economy. Unfortunately, declines are more likely in the months ahead as the coronavirus spreads and causes continued economic harm, social disruptions, and permanent scarring."
Paul Ashworth, chief US economist at Capital Economics, said: "All things considered, the renewed decline in confidence illustrates that the surge in infections is weighing on the economy but, with retail sales almost back to pre-pandemic levels in June, we would have expected the pace of recovery to slow markedly over the next few months anyway."
Pantheon Macroeconomics said: "The consensus always looked too bullish, given the clear drop in economic expectations in the TIPPOnline survey, which often leads the Michigan numbers, but the decline is a bit bigger than we expected.
"Most of the hit is in the expectations component, which fell by 7.8 points, while current conditions slipped only 2.6 points. This is not surprising, as the current conditions number tends to respond to jobless claims, which have been falling. Expectations are more responsive both to developments on the Covid front, which have mostly been awful, and the stock market, which has been net unchanged since early June.
"With jobless claims now no longer falling and the Covid news still grim, we expect sentiment to slip again next month. If Congress fails to re-up the enhanced unemployment benefits, which expire at the end of this month, the dip in sentiment will become a plunge."
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