The University of Michigan Survey of Consumers found spending confidence by American consumers increased slightly in February. The coronavirus was mentioned by 8% of all consumers in February when describing the reasons for their economic expectations. However, on the last days of the February survey, 20% mentioned the coronavirus due to the steep drop in equity prices as well as the CDC warnings about the potential domestic threat of the virus.
While too few cases were conducted to attach any statistical significance to the findings of the University of Michigan Survey of Consumers, it is nonetheless true that the domestic spread of the virus could have a significant impact on consumer spending.
Spending Confidence & Covid-19
Surveys of Consumers chief economist, Richard Curtin, further noted If the virus spreads into U.S. communities, consumers are likely to limit their exposure to stores, theaters, restaurants, sporting events, air travel, and the like. There is likely to be some advance buying and increased online shopping, but much of the discretionary spending may not occur. To be sure, there is no reason to anticipate that consumers will engage in such extreme measures at this time. It is a fine line that needs to be drawn to encourage people to take normal steps of preventive hygiene but not to engage in panic reactions.
Robert McKinley, Senior Analyst for CardWeb, Bankcenter and RAM Research says the pandemonium surrounding the Covid-19 pandemic could still trigger a severe global recession if consumers and business cutback on travel and public buildings, including schools, shopping centers, etc. begin to close. McKinley says investors see a silver lining in the healthcare market as well as companies involved in teleconferencing and online gaming.
National Consumer Confidence
The Conference Board Consumer Confidence Index for February suggests spending will likely support economic growth through at least the summer. Despite a slight uptick for the first two months of this year, the Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased from 173.9 to 165.1. However, the Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – increased from 101.4 last month to 107.8 this month.
Those claiming business conditions are “good” declined from 40.0% percent to 38.6%, while those claiming business conditions are “bad” increased, from 10.4% to 11.9%. Consumers’ assessment of the job market also moderated from last month. Those saying jobs are “plentiful” decreased from 47.2% to 44.6%, while those claiming jobs are “hard to get” increased from 11.9% to 14.8%.
Lynn Franco, Senior Director of Economic Indicators says: “Consumers’ short-term expectations improved, and when coupled with solid employment growth, should be enough to continue to support spending and economic growth in the near term.”
Florida Consumer Confidence
The University of Florida’s Consumer Sentiment Index reports consumer sentiment among Floridians increased 2.8 points in February to 100.9 from a revised figure of 98.1 in January. Among the five components that make up the index, three increased and two decreased. Floridians’ opinions of their personal financial situation now compared with a year ago increased 1.3 points from 93.8 to 95.1.
Expectations of personal financial situation a year from now decreased slightly: nine-tenths of a point from 109.1 to 108.2. Expectations of U.S. economic conditions over the next year showed the greatest increase, up 7.9 points from 93.5 to 101.4. Similarly, expectations of U.S. economic conditions over the next five years increased 6.7 points from 94 to 100.7.
Hector H. Sandoval, director of the Economic Analysis Program at UF’s Bureau of Economic and Business Research, says “Overall, Floridians are more optimistic. The increase in February’s confidence comes mostly from consumers’ future expectations about the national economy in the medium- and long-run. Importantly, these outlooks are shared by all Floridians regardless of their gender, age or socioeconomic status.”