Daily Management Review

Early August Consumer Sentiment In US Reaches Lowest In A Decade


Early August Consumer Sentiment In US Reaches Lowest In A Decade
With Americans providing a deflated outlook for everything from personal finances to inflation and employment in a recent survey – which led economists to conclude that the consumer confidence in the country dropped significantly in early August to its lowest level in a decade which, according to analysts could be a worrying for the economy.  
Analysts say that this unexpected phenomenon could prompt Federal Reserve policymakers to pause and watch whether this trend further translates into a dent in economic activity in the months ahead. The United States central bank was reported to be contemplating a decision of when to pull back the extraordinary stimulus that it had implemented to keep the economy afloat during the Covid-19 pandemic.
In the first half of the month, the preliminary consumer sentiment index as determined by the University of Michigan dropped to 70.2 compared to a final reading of 81.2 in July, the university said. The August number was also the lowest since 2011 and the index had dipped even lower for only two months in the last 50 years. One of the drops was during the peak of the 2007-2009 global financial recession and the other was during the first wave of shutdowns in April 2020 at the beginning of the pandemic.
The drop in sentiment, as found in the survey, was found to be widespread across income, age, and education subgroups and regions of the country. According to estimates from economists, the index was anticipated to remain unchanged at 81.2.
There as a fall in U.S. stock market indexes as soon as the report was released while there were gains in the price of gold. US Treasury bond yields hit session lows.
"The renewed plunge suggests the latest wave of virus cases driven by the Delta variant could be a bigger drag on the economy than we had thought," said Andrew Hunter, an economist at Capital Economics.
It despite the August figures, it is still expected that the economic growth for the entire year will still be the fastest in four decades after it went into a brief recession in 2020 caused by the coronavirus pandemic. However, there are some indications of the slowing down of the recovery.
Over the past two weeks, the number of Covid-19 cases has almost doubled to reach its highest peak in more than six months with the highly transmissible Delta variant of the coronavirus spreading fast all across the country. While disruptions in the supply chain continue, the service sector is also facing labor shortages.
"The pandemic's resurgence due to the Delta variant has been met with a mixture of reason and emotion...mainly from dashed hopes that the pandemic would soon end," Richard Curtin, the survey director, said in a statement.
There was also an expectation among consumers of a rise in inflation in the medium term, the survey also showed/. This is a metric that the Fed is also closely watching and wants expected inflation to remains anchored.