Consumer sentiment fell off a cliff this month.
Mercifully, the final read on University of Michigan’s gauge was basically unchanged from the preliminary print, versus an expected further deterioration. In fact, at 71.8, the headline gauge was up a tad from 71 in the early read.
But the big picture shows an Icarus-like fall from the nosebleed highs seen during most of Donald Trump’s reign (yellow line).
One notable from the commentary that accompanies the final read for April on the Michigan survey is the description of the divergence between current conditions and expectations.
“The Current Conditions Index fell by 29.4 points in the past month and by 40.5 points in the past two months, whereas the Expectations Index has posted smaller declines of 9.6 points in the past month and 22.0 points from February”, the survey’s chief economist Richard Curtin said Friday. The figure shows the outsized nature of the declines in the current conditions gauge versus its expectations counterpart.
“While the decline in both indices indicates an ongoing recession, the gap reflects the anticipated cyclical nature of the coronavirus”, Curtin writes.
That may be optimistic, to say the least. Or, consumers could be taking their cues from politicians who, in some states, are promising to reopen their economies and get things cranking in earnest against the advice of public health officials (in select cases).
If that’s at least partially behind the relatively pedestrian drop in the expectations gauge (versus the massive plunge in the current conditions index), it could be a false dawn and a bad omen all rolled up into one.
With that in mind, I’ll leave you with Curtin:
Consumers’ reactions to relaxing restrictions will be critical, either putting further pressure on states to reopen their economies, or exerting added pressure to extend the restrictions even if it has negative consequences for economic prospects. The risks associated with these decisions are not equally balanced, with an incorrect decision to reopen having serious repercussions. The necessity to reimpose restrictions could cause a deeper and more lasting pessimism across all consumers, even those in states that did not relax their restrictions.
We will see how Europe does and then we might know. Early information from Germany (who opened some retail) does not indicate that the shoppers are back in a meaningful way.
Systemic as in single leg take down type of systemic where we landed flat on our back on the concrete knocking the breath out of us and providing a head rattling painful concussion to boot.. When/if we get up and fight again we are not going to leave that leg open like that again; of course we might get punched in the face due to our preoccupations.
Quick reminder: We haven’t solved anything yet. Still can’t get mass testing (with quick results) fully up and running. Oh, and any serious attempt to Contact Trace in this country is going to be a f-cking joke. Our ongoing societal and bureaucratic disorganization will be fully exposed as a result of that endeavor.
I’m amazed at how easily the optimists are “fast forwarding” to the end of this movie. This will make Gone With The Wind seem like a cinematic short.
Sophie’s choice, as you’ve said.