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Economy

Economic Data (USA)

Friday, April 24, 2020

Consumer Sentiment: Final Result for April 2020

The University of Michigan's Index of Consumer Sentiment (ICS) - Final Result for April 2020 was released today:

Predicted: 68.0
Actual: 71.8

  • Change from Previous Month: -19.416% (-17.3 points)
  • Change from 12 Months Previous: -26.132% (-25.4 points)

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  • Final ICS Reading for March 2020: 89.1

  • Final ICS Reading for April 2019: 97.2

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From today's report:

"...April's final Sentiment Index reading remained largely unchanged from the mid-month figure (+0.8 points), and households with below median incomes expressed the same level of confidence as those with above median incomes (71.9). This merging reflects somewhat larger April declines among households with above median incomes (-19.8 points) compared with those with below median incomes (-14.0). The seven-day moving average of the Index of Consumer Sentiment indicated a second larger improvement that was quickly reversed (see the featured chart); its cause could not be linked to any direct judgements about the coronavirus.

The notable divergence between the two main components of the Sentiment Index remained large. 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.

While the decline in both indices indicates an ongoing recession, the gap reflects the anticipated cyclical nature of the coronavirus. In the weeks ahead, as several states reopen their economies, more information will reach consumers about how reopening could cause a resurgence in coronavirus infections. 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..."

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The ICS is derived from the following five survey questions:


  1. "We are interested in how people are getting along financially these days. Would you say that you (and your family living there) are better off or worse off financially than you were a year ago?"


  2. "Now looking ahead, do you think that a year from now you (and your family living there) will be better off financially, or worse off, or just about the same as now?"


  3. "Now turning to business conditions in the country as a whole, do you think that during the next twelve months we'll have good times financially, or bad times, or what?"


  4. "Looking ahead, which would you say is more likely: that in the country as a whole we'll have continuous good times during the next five years or so, or that we will have periods of widespread unemployment or depression, or what?"


  5. "About the big things people buy for their homes, such as furniture, a refrigerator, stove, television, and things like that. Generally speaking, do you think now is a good or bad time for people to buy major household items?"

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The ICS uses a 1966 baseline, i.e. for 1966, the ICS = 100. So any number that is below the 1966 baseline of 100 means that the folks who were polled recently aren't as optimistic about the U.S. economy as the sample that was polled back in 1966.

The ICS is similar to the Consumer Confidence Index in that they both measure consumer attitudes and offer valuable insight into consumer spending.

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The "predicted" figure is what economists were expecting, while the "actual" is the true or real figure.

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