Government Handouts Spark Upside Surprise In Sentiment But Hope Tumbles

Having plummeted in April, UMich consumer sentiment was expected to deteriorate further in preliminary May data as the reality of nationwide lockdowns sink in to the American psyche. However, it appears the stock market’s gains prompted some gains as bailouts hit but hope continued to tumble…

• Current economic conditions index rose to 83.0 vs. 74.3 last month

• Expectations index fell to 67.7 vs. 70.1 last month

Source: Bloomberg

Confidence inched upward in early May as the CARES relief checks improved consumers’ finances and widespread price discounting boosted their buying attitudes:

Consumers were asked to identify their top concerns about the pandemic: was it the threat to their health, the required social isolation, or the impact on family finances? The health threat dominated in both months, cited by 61% in April and 57% in May. The original hypothesis was that as their primary concerns shifted from health to finances, consumers would become less accepting of constraints on reopening the economy. 

Those that cited damages to their finances as their top concern fell to 17% in May from 22% in the prior month. Surprisingly, it was greater concerns about social isolation that increased, cited as the top concern by 21% in May up from 14% in April. While these shifts were quite small, they indicate the growing costs of social isolation and its potential to shift opinions about reopening the economy.

Somewhat surprisingly, Democrats confidence improved as Republicans faded further…

Source: Bloomberg

Buying Conditions rebounded modestly…

Source: Bloomberg

The percentage of Americans who have a positive view of the stock market in the next 12 months fell to its lowest sicne June 2016…

Source: Bloomberg

Finally, bearing all that in mind, a worsening economy was reported by 95% of all consumers, only below the peak of 96% in February 2009.

Thanks to the media!!