Since the novel coronavirus outbreak, markets have been crushed across the globe, and consumers are getting the worst of it. U.S. consumer confidence hit its lowest level ever, according to Morning Consult’s Index of Consumer Sentiment (ICS). The ICS fell over 12%, and this the lowest since it started tracking over two years ago.
Overall, the drop in consumer confidence has been quick and record-setting on a daily basis. The quick descent has been consistent with recessionary conditions, particularly considering how much worse things are likely to get from both a health and economic perspective.
A few of the main points that Morning Consult noted were that consumers still expect business conditions to worsen in the near future. Also 19% of Americans think that their personal financial situation will be worse in the near future, an increase of 14% from last week. Finally, higher-income consumers believe it’s a bad time to spend.
What stands out here is that confidence has deteriorated the most among high-income consumers who are responsible for most discretionary spending. Consumers can change their discretionary purchasing habits very quickly, supporting the view that there will be a relatively short lag (less than three months) between the fall in confidence and the onset of a recession.
In January and most of February, consumers believed that future business conditions in the country would remain the same over the year. Now a growing fraction of consumers believe that business conditions will be worse off in the coming 12 months. Currently, 38% of consumers expect business conditions to deteriorate over the course of the year, versus 26% last week.
Morning Consult detailed:
Stated differently, fewer and fewer Americans believe now is a good time to open a business, pursue a new career, or take some other risk with the hope of building a better future. The dynamism of the American economy depends on risk taking. When so many people believe the future will be worse than the present, that sort of risk taking is likely to abate.
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