U.S. consumer sentiment drops in early August to decade low amid delta variant concerns

Consumer sentiment in the United States dropped in early August as delta variant of Covid-19 weakened confidence about future economic development, according to a study released on Friday.

In its preliminary August reading, the consumer sentiment index fell to 70.2. This is a decrease of more than 13% from the July result of 81.2, and it is lower than the April 2020 figure of 71.8, which was the lowest of the pandemic era.

It was the metric's lowest value since 2011 while Dow Jones polled economists, who predicted an August score of 81.3.

“Over the past half-century, the Sentiment Index has only recorded larger losses in six other surveys, all connected to sudden negative changes in the economy,” Richard Curtin, chief economist for the University of Michigan’s Surveys of Consumers, said in a statement. The only larger declines in the Sentiment Index occurred during the economy's shutdown in April 2020 (-19.4%) and at the depths of the Great Recession in October 2008 (-18.1%).”

The survey's measure of current economic circumstances fell to 77.9 from 84.5 in July, while consumer expectations fell to 65.2 from 79.0 in July.

Also, the survey's one-year inflation forecast fell to 4.6 percent from 4.7 percent, but its five-year inflation forecast rose to 3.0 percent from 2.8 percent in July.

“Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months…...hopes that the pandemic would soon end,” Curtin said. “In the months ahead, it is likely that consumers will again voice more reasonable expectations, and with control of the Delta variant, shift toward outright optimism.”

Other recent economic data indicators, such as weekly unemployment claims have shown that the economy is still recovering.

Consumer price hikes in July, according to the Labor Department, but total inflation remained at a historically high level, as demand outpaced the supply of goods and services.