COVID-19 fears send consumer sentiment down in early March, new data shows
Consumer fears over the spread of COVID-19 spilled over into some of the first data measuring the economic effects of the virus on public opinion.
The University of Michigan reported Friday that its preliminary readings of consumer sentiment declined across the board in March.
The index of consumer sentiment fell to 95.9 from 101.0 in February; the current economic conditions index declined to 112.5 from 114.8; and the index of consumer expectations dropped to 85.3 from 91.2.
Economists surveyed by IFR Markets had expected the index of consumer sentiment to have come in at 95.0, the current economic conditions index to read 112.6 and the consumer expectations index to come in at 88.2.
“Consumer sentiment fell in early March due to the spreading coronavirus and the steep declines in stock prices,” said the survey’s chief economist, Richard Curtin. “Importantly, the initial response to the pandemic has not generated the type of economic panic among consumers that was present in the run-up to the Great Recession. Nonetheless, the data suggest that additional declines in confidence are still likely to occur as the spread of the virus continues to accelerate.”
He noted there was a bright spot in the report, the long-term outlook.
“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; this component fell by 29 points, accounting for 83% of the total point decline in early March. In sharp contrast, consumers more favorably judged the economic outlook over the next five years than last month.”
Import prices decline in February
U.S. import prices fell 0.5% in February after a 0.1% gain in January, the Labor Department reported.
February’s fall was the largest decline since the index fell 0.6% in August.
Prices for U.S. exports dropped 1.1% in February, after rising 0.6% in January.
Economists surveyed by IFR Markets had expected import prices to have dropped by 0.9% in February and export priced to have fallen 0.4%.
On a year-over-year basis, import prices decreased 1.2% from February 2019 to February 2020, as declining prices for both non-fuel and fuel imports contributed to the movement.
Falling import fuel prices more than offset higher prices for non-fuel imports. Import fuel prices decreased 7.7% in February, the largest monthly decline since the index dropped 7.8% in June 2019. The February decrease was led by lower prices for petroleum, though falling prices for natural gas also contributed to the monthly decline. Petroleum prices fell 7.6% in February following no change in January and a 0.5% advance in December. The price index for natural gas declined 12.4% in February, after decreasing 13.2% in January.
Import fuel prices fell 5.8% over the past 12 months, driven by a 5.5% drop in petroleum prices and a 13.9% decline in natural gas prices.
Looking ahead, Curtin said there were several options available to fight the economic effects of COVID-19.
“While the most effective containment efforts are widespread closures and self-isolation, those same actions have the largest negative impact on the economy and significantly increase the probability that the pandemic will be followed by a recession that lasts longer than the virus,” Curtin said. “The best policy antidote would be immediate relief provided by multiple sources of cash transfers and debt forbearance. To avoid a recession, speed is more essential than targeting. Moreover, maintaining confidence in the effectiveness of economic policies is essential, otherwise the intended behavioral reactions on spending may not be forthcoming.”