WASHINGTON — After years of riding high, American consumer confidence dropped rapidly in March in another warning sign of how punishing the coronavirus pandemic may become for the U.S. economy, according to a closely followed survey released Friday.
Consumer sentiment, as measured by the University of Michigan’s monthly survey, saw its sharpest drop since October 2008 during the Great Recession.
And even then, analysts said, the current decline significantly understated the coronavirus toll as two-thirds of the survey interviews were conducted before lock-down and physical distancing orders in mid-March shut down hundreds of thousands of shops, restaurants, offices and other large parts of the American economy.
“The economics of fear are now in plain sight,” said Oxford Economics, a British economic research firm, noting that the pandemic “is dealing a major blow to confidence that will lead to a sharp retrenchment in consumer spending “
That is especially worrisome because high levels of consumer confidence have consistently buoyed the U.S. economy in recent years, despite scant growth in spending power for most Americans.
Some 70% of total U.S. economic output, or gross domestic product, is tied directly to consumer spending.
Richard Curtin, director of the Michigan survey, said the latest survey data suggest that the economy has already entered a recession and that “the economic downturn could persist at least until the end of the year.”
Consumer sentiment measuring attitudes toward current conditions and future expectations both fell sharply in March. And Curtin said people’s confidence sharply worsened near the end of the month.
“This is really quite unlike any other decline we’ve seen,” he said.
The index saw an 11.9 percentage point drop, compared to the 12.7 point drop during the Great Recession. The University of Michigan has tracked monthly changes in consumer sentiment since 1978.
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