Skip to Content
April 24, 2020 Blog 2 min read
Consumer sentiment has plunged in recent months as the economy ground to a near halt, but evidence of some stability is noteworthy.

4.24.20 Consumer Sentiment ChartThe University of Michigan’s Consumer Sentiment index declined sharply in April, falling to 71.8 — down over 17 points in the last month. Even so, the decline was less severe than anticipated, as economists had forecast a more pronounced drop to around 68.0. 

Sentiment has fallen sharply since its recent peak in February of this year, when the index hit 101 on the back of improving trade relations with China and a firming economic outlook. Over the past two months, however, the COVID-19 pandemic has caused a notable deterioration in the collective mood of consumers and their assessment of economic conditions.

The survey results paint an unambiguous picture of a rapid deterioration in sentiment that mirrors the speed and magnitude of the decline in the economy. Consumers’ assessment of current conditions have turned much more negative in the span of several weeks.

While consumers are less optimistic about their expectations for the future, the adjustment there has been less pronounced. Even before the outbreak of COVID-19 established a foothold in the U.S., consumers expressed a more skeptical view about the future path for the economy, even with a strongly positive assessment of current conditions.

While health concerns related to the virus outbreak have created a sense of fear and anxiety for many, the aggressive measures taken to attempt to contain the virus also play a significant role. With stay-at-home orders in place to varying degrees across much of the country, large portions of the economy came to an abrupt halt. Unemployment has risen rapidly, with over 20 million individuals filing for unemployment in the past month.

That deterioration in employment has weighed heavily on consumer sentiment, hitting household finances hard. Given the lingering questions about the path ahead, the impact on consumer behaviors over an extended period, and the scars that this downturn will create, a rapid return to the pre-crisis normal is highly unlikely.

The healing process will take time, just as it always does coming out of a recession. Still, the economy was in reasonably good shape coming into the year. The fact that this downturn was caused by an exogenous shock and is not the byproduct of a needed purge in some aspect of the economy should be a positive at the margins.

The full impact of the pandemic on the economy remains to be seen, but it will undoubtedly weigh heavily on growth for the first half of the year. However, the unprecedented amount of economic stimulus being provided should help to blunt the blow. While stimulus can only go so far to promote growth in an economy that is still largely in forced lockdown, it should help to limit the damage caused by the slowdown in economic activity and put the economy in a better position to rebound once the virus issue has been contained. 

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.

Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.

COVID-19: Navigate uncertainty. Find peace of mind.

Access insights