In light of the rampant fear over the coronavirus outbreak and the subsequent sell-off on Wall Street, preliminary data released by the University of Michigan on Friday showed a relatively modest deterioration in U.S. consumer sentiment in the month of March.
The report showed the consumer sentiment index slid to 95.9 in March after rising to 101.0 in February, although the index still came in above economist estimates for a reading of 95.0.
“Importantly, the initial response to the pandemic has not generated the type of economic panic among consumers that was present in the runup to the Great Recession,” said Surveys of Consumers chief economist Richard Curtin.
He added, “Nonetheless, the data suggest that additional declines in confidence are still likely to occur as the spread of the virus continues to accelerate.”
The pullback by the headline index primarily reflected a notable decrease by the index of consumer expectations, which tumbled to 85.3 in March from 92.1 in February.
The current economic conditions index showed a more modest drop, slipping to 112.5 in March from 114.8 in February.
“Perhaps the most important factor limiting consumers’ initial reactions is that the pandemic is widely regarded as a temporary event,” Curtin said.
“The component of the Sentiment Index that posted the greatest loss involved judgements about prospects for the economy during the year ahead,” he added. “In sharp contrast, consumers more favorably judged the economic outlook over the next five years than last month.”
Curtin noted the most effective efforts to contain the outbreak, including widespread closures and self-isolation, will also have the largest negative impact on the economy and significantly increase the probability a subsequent recession will last longer than the virus.
On the inflation front, one-year inflation expectations edged down to 2.3 percent in March from 2.4 percent in February, while five-year inflation expectations were unchanged at 2.3 percent.
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