US Consumer Sentiment Drops To Lowest Level Since Pandemic's Onset

Consumers are not very happy: sentiment among shoppers fell by 13.5% to 70.2% in August, according to the most recent Surveys of Consumers University of Michigan report.

The drop is the consumer sentiment index’s third-largest single-month decline.

What Happened: Declines like this have been most recently recorded when the economy shutdown during April 2020 (when it dropped by 19.4%) and when the economy was in the throes of the Great Depression, when consumer sentiment dropped by 18.1%.

“There is little doubt that the pandemic's resurgence due to the delta variant has been met with a mixture of reason and emotion,” wrote chief economist Richard Curtin, the report’s author.

The drop occurred among consumers across demographic lines of age, income and education achievement.

Many economists on Twitter TWTR agreed with Curtin, noting that consumer concerns are tied to COVID-19 surges across the country. Some also believe inflation is concerning consumers, though that is very much contested.

“#DeltaVariant's economic effects have supply and demand dimensions,” tweeted economist Mohamed El-Erian. “Re the latter, today’s University of Michigan consumer sentiment data is a worry: notable 11 pts lower to 70.2 on account of current conditions/expectations. Inflation expectations were broadly unchanged overall.”

Why It Matters: Consumer spending is critical to a healthy economy, and is particularly relevant companies as it helps them plan and invest, according to the World Economic Forum.

What Else: Curtin is hopeful that consumer sentiments will rebound once the delta variant is under control, and more people get vaccinated.

Photo: Fikri Rasyid via Unsplash .