Consumer sentiment plunged to its lowest level since 2011 amid fears that the delta variant will add to the negative economic effects of the COVID-19 pandemic.
The University of Michigan index of consumer sentiment plummeted to 70.2 in early August, from its 81.2 level in July, according to an update released Friday. The drop represents a 13.5% decline and was way off from consensus expectations of 81.2. Even during the height of the pandemic in the spring of 2020, consumer confidence was not as low.
“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 pandemic would soon end,” said Richard Curtin, director of the survey.
The decline represents the third sharpest drop in sentiment following April 2020, when it declined 19.4%, and during the 2008 recession, when it fell 18.1% in October of that year.
BIDEN ECONOMIC APPROVAL RATING DROPS AMID INFLATION FEARS
For some frame of reference, sentiment averaged 81.5 in 2020, 96 in 2019, and 98.4 in 2018. It reached as high as 101 in February of last year as the economy reached its apex and had only a 3.5% unemployment rate.
Consumers' views on current conditions dropped to 77.9 in August from 84.5 in July.
The COVID-19 pandemic has caused unexpected twists and turns during the country’s economic recovery. While new cases of the virus declined rapidly earlier this year amid increased vaccinations, the new delta variant, a much more contagious strain of the pathogen, has caused new infections, hospitalizations, and deaths to rise in the United States and European countries.
Some companies have opted to delay reopening plans in lieu of the new variant, and both businesses and some municipalities have begun forms of vaccine mandates in order to cut down on the rising number of new infections. Airlines have also begun to feel the squeeze, with Southwest and Frontier both announced recently that their third-quarter revenues will be less than expected.
Inflation has also worried many people.
Consumer prices increased 5.4% in the year ending in July. The figure was slightly above expectations but was less dramatic than the surging price increases seen over the past few months. Annual inflation previously rose to 4.2% in April, grew to 5% in May, and was at 5.4% in June.
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Despite recent red-hot gross domestic product growth, unemployment still sits at 5.4%, and there are millions fewer people currently employed than prior to the pandemic. Many employers are also struggling to recruit workers, and there are currently more openings than people to fill them.
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Tags: News, Consumers, Consumer Confidence, Business, Coronavirus, Delta Variant
Original Author: Zachary Halaschak
Original Location: Consumer sentiment plunges to lowest level in decade as delta variant surges
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