Consumer Sentiment Posts 20.3% Decline in Early April

Ann Arbor, MI, April 9, 2020-Consumer sentiment declined 20.3% to 71.0 in early April, from March’s 89.1 rate, according to preliminary results from the Survey of Consumers. 

This represents a 27.0% decline year over year. 

“Consumer sentiment plunged 18.1 Index-points in early April, the largest monthly decline ever recorded,” says Survey of Consumers chief economist Richard Curtin. “When combined with last month's decline, the two-month drop of 30.0 Index-points was 50% larger than the prior record. Of the two Index components, the Current Conditions Index plunged by 31.3 Index-points, nearly twice the prior record decline of 16.6 points set in October 2008. In contrast, the Expectations Index fell by 9.7 points, a substantial decline, but not nearly as steep as the record 16.5 point drop in December of 1980. This suggests that the free-fall in confidence would have been worse were it not for the expectation that the infection and death rates from covid-19 would soon peak and allow the economy to restart. As noted in last week's special report, anticipating a quick and sustained economic expansion is likely to be a failed expectation, resulting in a renewed and deeper slump in confidence. Indeed, the peak decline in the Expectations Index recorded in December 1980 reflected a relapse following the end of the short January to July 1980 recession, signaling the start of a longer and deeper recession that lasted from July 1981 to November 1982. Consumers need to be prepared for a longer and deeper recession rather than the now discredited message that pent-up demand will spark a quick, robust, and sustained economic recovery. Continued declines in the seven-day average Sentiment Index can be expected in the weeks ahead. Sharp additional declines may occur when consumers adjust their views to a slower expected pace of the economic recovery.”