The U.S. economy entered the era of coronavirus on a strong footing but consumers are worried about the short-term future, a survey of consumers showed Tuesday.
The Conference Board’s index of consumer confidence fell sharply in March but the decline was nearly all attributable to the expectations portion of the survey. The present situation component fell from 169.3 to 167.7, a small decline to a still historically elevated level, indicating that U.S. consumers felt comfortable with their jobs and business conditions even as many parts of the economy began to shut down in March.
The expectations gauge, however, crashed. This fell from 108.1 last month to 88.2 in March, the lowest level of the Trump presidency.
“Consumer confidence declined sharply in March due to a deterioration in the short-term outlook,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “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.”
The resilience in the current conditions was evident in views of both general business conditions and the labor market. The share of consumers claiming business conditions are “good” was relatively unchanged at 39.6 percent, while those claiming business conditions are “bad” increased, from 10.8 percent to 11.4 percent. Those saying jobs are “plentiful” decreased from 46.5 percent to 44.9 percent, while those claiming jobs are “hard to get” was unchanged at 13.9 percent.
The outlook for the next six months is where the coronavirus had its biggest impact. The percentage of consumers expecting improved business conditions over the next six months fell from 20.6 percent to 18.2 percent, while those expecting business conditions will worsen more than doubled, from 7.2 percent to 14.9 percent. The share expecting more jobs slipped from 16.6 percent to 15.5 percent, while those anticipating fewer jobs jumped, from 12.0 percent to 17.1 percent.
Regarding their short-term income prospects, the share expecting an increase fell from 22.7 percent to 20.7 percent, while the share expecting a decrease rose from 6.1 percent to 8.8 percent.
All of those figures are likely to get significantly worse in the next few months. The measures of the present situation will catch up with the expectations for the future, while the expectations gauge will likely not improve until real progress against the virus is evident. As of March, far too many consumers expect improved business conditions and far too few anticipate fewer jobs, implying that consumers will encounter downside economic shocks in the months ahead.