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First Cut: Consumer Confidence Index shows consumers rattled by pandemic news in March

The Conference Board’s Consumer Confidence Index showed consumers were rattled by news of the spread of COVID-19 in March and steps to stem the contagion. The survey was compiled with data through March 16 and may not fully reflect the increasing worries of consumers as shutdowns of  activities lengthen. The preliminary index reading of 120.0 for March was the lowest since 120.0 in July 2017, just before the labor market looked decisively stronger and income started to rise more substantively. A reading at the present level isn’t bad in the historical context, but a sharp drop like this is a signal that confidence may not hold up. The arrival of COVID-19 in force in the US is not a one-month influence on consumers’ perceptions.

Optimism in the present situation were only slightly affected — for now — but worries about the future were much more intense. The index for present conditions dipped a small 1.6 points to 167.7 in March, hardly more than a normal month-to-month swing. However, expectations for conditions six months from now — which accounts for 60% of the index — fell 19.9 points to 88.2, the lowest since 86.0 in October 2016.

All the components of the Consumer Confidence Index were down in March. However, the negative contributions from present employment and present business conditions were small. It was anticipated sharp declines in future business conditions, future employment, and future income that led to the fall in overall confidence.

The report does not capture things like the massive increase in filings for jobless benefits that started around mid-month. Early in the month consumers may have been more worried about layoffs and/or finding work, but the reality hadn’t come home quite yet. The April reports on confidence should be far more affected by present conditions, although the outlook for the future may not worsen quite as much.

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