The latest reports show consumer spending is slowly recovering as doubt among consumers has shed off after different countries have eased their statewide lockdowns one after another.
As more states and businesses are reopening, consumer confidence has seen a stabilized trend through May, coming from its eight-week-long free-fall. It dropped to its lowest levels since 2016 beginning mid-March and continued to slide down until late April.
May consumer confidence stabilizes
A new report from The Conference Board released last Tuesday, May 26, has shown that the Consumer Confidence Index has slightly increased beginning the month of May. The figures climbed to 86.6 from April’s 85.7.
At the same time, short-term expectations for business, income, and job markets have jumped moderately from April’s 94.3 to 96.6. On the contrary, consumers present-day sentiments on the labor and business markets have declined from 73 to 71.1.
While the small upward trend indicates a boost in consumers sentiment, Lynn Franco, the senior director of economic indicators of The Conference Board, warned that fears over coronavirus and economy’s bleak status could still affect its “uneven path to recovery.”
In fact, a report from CNBC tells that economists anticipate another drop from the current numbers. A survey polled by Dow Jones suggests that it will plunge from 86.6 to 82.3 at the end of May, the lowest since the pandemic spread worldwide.
Reports: consumer spending rallies
Consumers’ optimistic view has positively affected May’s consumer spending as well. A study recently published by Cardlytics suggests that consumer spending’s downward trend had decreased before April ended.
Based on the gathered data, consumer spending year-over-year weekly spending has jumped to -21.4 from March’s -34.3. The increase in consumption started in late April as some countries like China, South Korea, and the United States slightly eased their stay-at-home policies.
The data also depicts e-Commerce leading the recovery, while in-store sales recorded an increase in essential goods such as groceries and pet supplies.
In the United States, some states are faring better while others are still on the rocks. Real-time data from Opportunity Insights shows that states like Kentucky, Tennessee, and Arkansas—which are all in the bottom 15 of U.S. median household incomes—are leading the recovery.
John Friedman, a professor of economics at Brown University, explained that the increase in consumer spending in said states is because lower-income individuals respond more to stimulus more than those who are living in higher-income places.
“On average, places with more widespread coronavirus cases did see spending fall a little bit further, but that is not the main thing we see determining differences. Instead, we see more differences between higher- and lower-income places.”
In addition, the gradual reopening was taken on a positive note by investors as well as stocks further rallied last Tuesday, May 26.
Still, it is quite too early to say that the world is already out of the woods despite the recovering consumer confidence, as the possibility for a second wave of coronavirus infection is still here.