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Consumers’ outlook for the economy turned its gloomiest since 2011, according to a monthly survey by the University of Michigan.
Consumer sentiment fell from July’s 81.2 to 70.2 this month, below the 71.8 notched in April 2020 as the economic collapse was under way.
Observers had expected a consensus reading of 81.3 for August.
“Over the past half-century, the Sentiment Index has only recorded larger losses in six other surveys, all connected to sudden, negative changes in the economy,” Richard Curtin, chief economist for Michigan’s Surveys of Consumers, said in a statement announcing the survey’s results.
Two of those bigger drops were in April 2020 and in October 2008, as the Great Recession reached its deepest.
This month’s plunge is due to the rapid spread of the Delta variant and resulting strictures, travel shutdowns, and business limitations, CNBC reported.
“Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the [health crisis] would soon end,” Curtin noted.
“In the months ahead, it is likely that consumers will again voice more reasonable expectations,” he added, “and, with control of the Delta variant, shift toward outright optimism.”
TREND FORECAST: Consumers fearful of the future curtail spending; business owners uncertain of the economy cut back on hiring and investing.
The surveys’ results portend our forecast that should the COVID War 2.0 continue to intensify, the U.S. and world economies will decline for the rest of this year.
As a result, financial organizations will reduce growth-rate forecasts for the fourth quarter of this year, and perhaps longer, for the U.S. and the world.