The University of Michigan (UoM) consumer sentiment index came in at 73.7, beating expectations of 65 for May and above the 71.8 reading seen in April. Chief economist for the survey, Richard Curtin, echoed commentary supporting the government stimulus packages which have helped cushion some of the damage from the coronavirus pandemic.
- The UoM consumer sentiment index came in at 73.7 in May vs. 71.8 in April and 65 expected.
- Consumer sentiment ticked upward thanks to the major relief package rolled out by the US government.
- Consumer expectations hit a six-year low, falling from 70.1 to 67.7.
Consumer sentiment is surprisingly resilient, according to the latest reading from the UoM survey. UoM survey chief economist Richard Curtin stated “The CARES relief checks improved consumers’ finances and widespread price discounting boosted their buying attitudes. The report provides a rare positive data point amid the ongoing fallout of the pandemic, with tens of millions of layoffs and record drops in manufacturing activity and retail sales in the last two months.
Retail sales fell 16.4% in April, the worst drop in recorded history, and 36 million Americans have applied for unemployment benefits in the last eight weeks. The rate of true unemployment was last measured at above 22%. However, the consumer outlook remains at 2014 levels. Richard Curtin released a report on May 08 entitled “Pandemic’s Impact on Our Economic Behavior.” In it, he points out that people make decisions based on emotions, which he believes many economic models fail to account for.
Consumer sentiment better than projected (65) pic.twitter.com/2RVNSrmIGf
— RickRus92932618 (@RickRus92932618) May 15, 2020
Considering Consumer Behavior
The report states that people have more fixed opinions on “evaluations founded on basic emotions, such as threats to one’s health and finances that the pandemic represents. Long after a vaccine ends the pandemic, some people may still automatically attach a negative evaluation to events that involve crowded venues, for example. However much a person had preferred to travel by air, commute to work by mass transport, shop at malls, attend concerts, sports events, choose urban residential and work locations, their future decisions may not overcome the attached negative emotions due to the pandemic.”
It’s still unclear to what extent the pandemic will continue to impact consumer behavior after the threat of the virus has receded. Approximately 70% of all US economic activity is attributable to consumer spending, making sentiment an increasingly important metric to track in the coming months.
Gold prices have seen strong upward momentum in today’s session, showing little response so far to the positive reading from the UoM survey. The survey is contending with the major news that retail sales have seen their worst month in history, with a quarter of retailers reportedly unsure if they can survive to the holiday season. Spot gold last traded at $1,741.73/oz, up 0.65% with a high of $1,744.67/oz and a low of $1,729.10/oz.