U.S. preliminary index of consumer sentiment surprised economists after it dropped from June’s 78.1, suggesting a reversal in the country’s economic recovery.
It looks like the United States is not out of the woods yet, as its consumer sentiment accumulated a significant decline coming from last month’s rebound. The downward trend occurred following new waves of coronavirus outbreak across the country, forcing some states like California to shut its economic activity again.
Survey shows U.S. consumer sentiment sank by 4.9
Conducted by the University of Michigan, the institution’s preliminary index of U.S. consumer sentiment shows that consumer confidence plummeted from June’s 78.1 to 73.2—losing a 5.8 gain it accumulated last month.
The data also suggests a 3.9 decline in U.S. consumers’ economic outlook, down from 87.1 to 84.2. Consumers’ expectations, however, had accumulated the most significant drop compared to the two and lost 6.1 and fell from last month’s 72.3 to 66.2.
“I think what consumers expect is somewhat greater economic harm, greater social dislocation,” director of the survey Richard Cutin told on a Bloomberg conference call.
Just recently, the Bank of America (BoA) officially announced that the U.S. economy had entered its “final but slow healing phase” and ended its V-shaped recovery stage. The bank, however, fears that the country’s economy might stumble again, particularly with the resurgence of coronavirus.
Cutin also shared the same sentiment and warned that the rising number of new coronavirus cases across the U.S. could significantly affect consumers’ uncertainty toward the economy. As a result, it could force them to limit their spending.
“[Coronavirus] causes continued economic harm, social disruptions, and permanent scarring,” he said. With that, the director expects the declines to continue in the coming months.
The preliminary report was released on Friday, July 17, and was conducted through the end of June until mid-July. The final data will be released on July 31.
Curtin calls for “aggressive” fiscal response
For Curtin, the sudden drop in U.S. consumer sentiment needs a quick and “aggressive fiscal response.” He argued that the increasing number of COVID-19 cases threatens people’s purchasing sentiment to drop deeper.
“Without action, another plunge in confidence and a longer recession is likely to occur,” Cutin said.
Economists from the Bank of America also expressed the same concern. With the U.S. economy’s upward trend, the analysts fear that another fall might happen again.
To counterbalance it, the bank asked the government for additional stimulus aid. The economists said another round of financial help is necessary to support and stabilize the economy’s current trend.
Last week, House Speaker Nancy Pelosi announced that there is a developing relief bill worth $1.3 trillion. Pelosi, however, argued that it is not enough.
As per the report, the senate targets to pass another stimulus by this week. Yet, as of this writing, there are no updates regarding the bill still.