Consumer Sentiment Plummets to Pandemic Era Low
August 13, 2021
Consumer sentiment saw a dramatic drop in early August, according to the preliminary reading of the University of Michigan’s consumer sentiment index.
The index plummeted to 70.2, a fall of more than 13% from July’s reading of 81.2. Economists had expected a slight uptick to 81.3
This marks the lowest reading of the pandemic era, lower even than the April 2020 reading of 71.8 when the economy shuttered at the start of the pandemic. This is the lowest reading since 2011.
In the last 50 years, there have only been six larger monthly drops in the sentiment index, according to the survey’s chief economist, and these have all coincided with sudden negative changes in the economy, like at the start of the pandemic in April 2020 or during the financial crisis in October 2020.
Economists from the Unversity of Michigan attribute the precipitous drop not to a dramatic shift in the economic recovery, but to an emotional response on consumers’ part, believing it be based on frustration about the pandemic’s resurgence and their dashed hopes that things were returning to normal.