After a merely modest rebound in June, preliminary July University of Michigan sentiment data was expected to show improvement, albeit also marginally, but instead it significantly disappointed. The headline sentiment index decreased 4.9 points to 73.2, according to data Friday, reversing most of the prior month’s 5.8-point gain. The gauge of current conditions dropped 3.9 points to 84.2, while a measure of expectations declined 6.1 points to 66.2.
As UMich reports, the reopening of the economy provided consumers with some financial relief and the subsequent resurgence in the virus made consumers less optimistic about their future financial prospects. Assessments of their current finances improved slightly in early July as 42% reported that their financial situation improved, which was barely above last month’s 39% and still well below the 58% recorded in February. Importantly, most of the gains were reported by households under age 45 and among those with incomes in the top third. When asked about their prospects for the year ahead, the proportion of households that anticipated gains fell back to 34% from last month’s 40%, with larger declines recorded among older and richer subgroups
Buying Conditions improved for housing in early July, but weakened notably for vehicles and large durables…
In all three markets, near record numbers of consumers explained their views by citing job and income uncertainties as the prime cause for postponing purchases. Record low interest rates have helped but their main impact has been on home purchases.
“Unfortunately, declines are more likely in the months ahead as the coronavirus spreads and causes continued economic harm, social disruptions, and permanent scarring,” Richard Curtin, director of the survey, said in a statement.
Without further action by Congress, “another plunge in confidence and a longer recession is likely.”
Finally, Americans’ view of the five-year economic outlook declined to the lowest level since 2014.
The drop in sentiment hit all political cohorts but Independents and Democrats the worst…