That’s the weakest reading since October 2016 and it’s likely to fall even further, perhaps dropping to levels last seen during the Great Recession — or worse. The sentiment survey bottomed out at 55.3 in 2008 during the middle of the last downturn.
The survey’s final results included more responses from consumers in the latter part of the month as COVID19, the disease resulting from a new strain of coronavirus, spread more rapidly and shuttered large parts of the economy.
What happened: The realization that the COVID-19 pandemic would bring the economy to a halt only began to sink in during the last two weeks of March. With millions of Americans losing their jobs, the economy is sputtering badly.
So are Americans’ expectation for the economy. A portion of the survey that examines how Americans view the six months sank to 79.7 from 92.1, also the lowest since late 2016.
Just a month ago, consumer sentiment stood close to a 15-year high.
Big picture: The U.S. economy has already begun to contract and is likely to endure a deep recession. How long it lasts and how quickly growth recovers will depend on how fast the federal governments and states manage to contain the viral outbreak.
Even if they do, the damage is unlikely to dissipate quickly. Many industries will need time to recover, especially if American maintain “social distancing.” That could keep the unemployment rate elevated for some time. Economists predict the jobless rate will soon surge to 10% or higher from a 50-year low of 3.5% just last month.
What they are saying? “The economics of fear are now in plain sight, said ecomomists Gregory Daco and Nancy Vanden Houten told clients in a note. “The decline still vastly understates the toll the coronavirus has taken on sentiment, as two-thirds of the interviews were conducted by March 11, before lockdown orders became more widespread, bringing the economy to a sudden stop”
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