RESEARCH TRIANGLE PARK – How are Americans feeling about the economy and your personal finances? Apparently it depends on the survey you read.
Consumers are more confident now than they were at the end of 2020, according to the WalletHub Economic Index, which tracks 10 different components of consumer sentiment that pertain to an individual’s personal financial situation.
Yet a consumer sentiment index measured by the University of Michigan dropped significantly in the preliminary August report, which was released last week, which the institution described as “a stunning loss of confidence in the first half of August.”
How stunning? The decline from July was 13.5%.
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According to the University of Michigan Surveys of Consumers chief economist, Richard Curtin, “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 preliminary reading of the University of Michigan survey data was a result of a score of 70.2, far below what some economists were predicting. According to reporting from CNBC, a group of economists surveyed anticipated a reading of 81.2. The reading in April 2020 was 71.8 and was the prior low since the onset of the novel coronavirus, and in December 2020, the reading was 80.7.
Compare that to the results from the WalletHub study, which found a 5.8% increase, on average, in consumer sentiment since December 2020 on the 10 metrics they track, with a 3.9% positive change in sentiment surrounding consumer’s personal financial situations during that same time span. Compared to July, when the overall index was 2.77, the index in August is now 2.78. In December 2020, it was 2.72.
“It’s a different research, with a different methodology than our survey,” said Diana Polk, Communications Manager for WalletHub, in response to a question regarding how the company’s Economic Index compared to the University of Michigan Surveys of Consumers data.
“Consumer sentiment seems to have dropped,” said Bradley W. Brooks, Ph.D., a professor in the McColl School of Business at Queens University of Charlotte in an interview with WRAL TechWire.
Sentiment was optimistic when COVID-19 cases seemed to be declining earlier in the summer, said Brooks. “Which has led to disappointment as the cases are now rising again.”
“When hopes were high it led to positive expectations that the pandemic situation was improving,” he added. “Unfortunately, when high expectations are not met, the negative effect can be particularly depressing.”
