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US Consumer Sentiment Recovers in May

Jay Brahach May 15, 2020

The University of Michigan’s (UoM) preliminary Consumer Sentiment Index rose by 2.6 in May, marking the first uptake in consumer confidence since the onset of the COVID-19 pandemic.

As the US begins to ease its lockdown conditions across several states and the CARES relief package gets money in the hands of consumers, improving their overall financial position, their confidence level has apparently risen. The improved finances for consumers was supported by widespread discount pricing by retailers across the US, a consequence of businesses adapting to the current market conditions.

The for Current Economic Conditions sub-index increased from 74.3 in April to 83.0 in May. In addition to the fiscal economic stimulus from the US government, low interest rates are incentivizing consumers to begin spending again. As markets ponder the possibility of the interest rates falling into negative territory, however, there is still concern that there is not much wiggle room for the Federal Reserve from a monetary policy perspective.

The picture is still not too pretty when considering the Index for Consumer Expectations, which fell from 70.1 in April, to 67.7 in May, marking an almost six-year low. Despite the positive take on current market conditions, consumers are still concerned about the extent to which the economy will recover in the year to come. This was largely driven by a sudden drop in expected income for higher income households, who until now have shown relative optimism through the crisis.

Interestingly, there appears to have been a shift in the psyche of US consumers since April. Concerns for personal finances fell from 22% of survey participants in April to 17% in May, but the cost of social isolation is beginning to weigh heavy on consumers, with Individuals citing isolation as their primary concern rose from 14% to 21% this month.

As the world slowly begins to lift its lockdown regimes, markets overall have seemed to enjoy positive risk sentiment today. Strong industrial production in China, and a rebound in European equity markets seem to suggest a hint of normality on the horizon.

 

Jay Brahach
Account Executive & Currency Analyst

 

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