The Conference Board said Tuesday its consumer confidence index dropped to 120 in March from 132.6 in February, its lowest level in three years. The decline wasn’t as severe as expected, as economists polled by Dow Jones forecast 110.
Is this a good sign? Unlikely.
The survey period covered Mar. 1-18, when consumers began worrying about the coronavirus.
The impact of coronavirus is just starting to show in the numbers. Things could be getting much worse in the coming months. The decline is just evidence of how much economic pain still waits on the horizon. Economists believe consumer confidence will likely decline further as the impact of the virus weighs more on the economy.
Lynn Franco, Senior Director of Economic Indicators at The Conference Board, said:
Consumer confidence declined sharply in March due to a deterioration in the short-term outlook. The intensification of COVID-19 and extreme volatility in the financial markets have increased uncertainty about the outlook for the economy and jobs. March’s decline in confidence is more in line with a severe contraction – rather than a temporary shock – and further declines are sure to follow.
Data from John Hopkins University showsthat more than 800,000 cases of COVID-19 have been confirmed globally. About 164,000 are in the U.S.
Countries, including the U.S., have taken measures to contain the spread of the virus. But those actions have slowed down the economy.
Goldman Sachs significantly downgraded its outlook for the U.S. economy between April and June. The investment bank now expects U.S. GDP to plunge by 34% in the second quarter as compared to the previous quarter.
Goldman has revised its forecasts because it thinks the U.S. labor market will collapse even more than expected. It predicts the unemployment rate will surge to 15% in the middle of the year before a sharp recovery takes place.
But not every economist believes that the economy will rebound so quickly.
Mark Zandi, chief economist of Moody’s Analytics, doesn’t believe there’s any chance we get back to where we were anytime in the near future.
The strength of the recovery depends on the course the virus takes. If the outbreak peaks in May or June, businesses could reopen gradually this summer.
But if the virus peaks later or come back in the fall, damages to the economy could be much worse. The aftermath of the recession could persist until next year. So, a slow rebound is more likely.
Consumer confidence might stay low for a while, as consumers could be hesitant to go into restaurants and other public gatherings even after officials give the all-clear signal.
According to a Harris Poll survey conducted over the weekend, 30% of Americans surveyed say they won’t go out to dinner again until at least four months after the virus spread flattens, while 44% say it will take that long for them to go to the movies again.
Americans will also take a long time before traveling and getting back on a plane. In the Harris survey, 57% of respondents said it will take at least four months for them to take a plane flight, while 54% say it will take that long for them to stay at a hotel.
People could also be less inclined to spend because they lost money in the huge stock market sell-off. And stock markets might not have reached a bottom yet.