- Preliminary July readings from the University of Michigan’s consumer sentiment gauge shows the index erasing recent gains amid new coronavirus outbreaks.
- The university’s Index of Consumer Sentiment fell to 73.2 from 78.1, and respondents’ view of current economic conditions sank to 84.2 from 87.1.
- “The widespread resurgence of the coronavirus” is to blame for the surprise drop, Richard Curtin, chief economist for the Surveys of Consumers, said.
- “Another plunge in confidence and a longer recession is likely” if Congress doesn’t soon pass another fiscal stimulus bill, he added.
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The University of Michigan’s consumer sentiment gauge snapped a two-month uptrend in July, offering one of the first signs that new coronavirus outbreaks are reversing economic recovery.
The university’s Index of Consumer Sentiment fell to 73.2 from June’s reading of 78.1. Respondents’ view of current economic conditions sank to 84.2 from 87.1. The Index of Consumer Expectations posted the biggest decrease, falling to 66.2 from 72.3 through the month.
Economists surveyed by Bloomberg expected the consumer sentiment gauge to modestly increase to 79.
“Consumer sentiment retreated in the first half of July due to the widespread resurgence of the coronavirus,” Richard Curtin, chief economist for the Surveys of Consumers, said in a release. “Unfortunately, declines are more likely in the months ahead as the coronavirus spreads and causes continued economic harm, social disruptions, and permanent scarring.”
Friday’s readings are preliminary and final results are slated for release on July 31.
The surprise decline arrives as lawmakers debate a second fiscal stimulus bill. Senate Majority Leader Mitch McConnell has indicated he wants to keep the package’s size below $1 trillion. House Majority Leader Nancy Pelosi said Thursday that a virus relief bill in the works is already set to spend $1.3 trillion, adding the sum is still “not enough.” Congress has mere days to pass a bill before the $600 per week expansion to unemployment benefits expires.
An “aggressive fiscal response is urgently needed,” Curtin said. Yet the virus’ continued spread and looming policy deadlines threaten to worsen consumer sentiments before they resume their climb back to pre-pandemic levels.
“Unfortunately, there is little time left on the political calendar for Congress to act as the election season is about to begin in earnest. Without action, another plunge in confidence and a longer recession is likely to occur,” Curtin said.
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