Consumer confidence plummeted in the first half of the month as rising cases of COVID-19 driven by the delta variant threw a wrench in the reopening of the U.S. economy.
The University of Michigan consumer sentiment index fell by 13.5 percent in August to 70.2 percent, beneath the low of 71.8 percent reached in April. The August drop was the index’s third-largest single-month decline, only exceeded by the onset of COVID-related shutdowns in April 2020 and the nadir of the Great Recession in October 2008.
Richard Curtain, chief economist for the survey, described this month’s decline in consumer confidence as “stunning” and widespread across income, age and educational attainment subgroups in every region of the country.
“There is little doubt that the pandemic’s resurgence due to the Delta variant has been met with a mixture of reason and emotion,” Curtain said.
“Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end.”
The emergence of the delta variant has caused coronavirus cases to skyrocket across much of the U.S. While almost all vaccinated individuals who contract COVID-19 avoid serious symptoms, the steep rise in cases has prompted many consumers, businesses and some local governments to follow stricter health protocols.
Economists pay close attention to sentiment surveys to gauge how changes in confidence among Americans could impact consumer spending and other important economic engines.
Even so, Curtain suggested consumer confidence could rebound as Americans become more familiar with the risks presented by the delta variant and have a clearer picture of how it may impact their well-being.
“In the months ahead, it is likely that consumers will again voice more reasonable expectations, and with control of the Delta variant, shift toward outright optimism. Consumers’ reaction to Delta’s modestly higher precautionary measures indicates the difficulty of producing optimal policy responses,” he said.