The American public’s confidence in the economy’s direction under President Joe Biden cratered in the early weeks of August.
The University of Michigan Consumer Sentiment Index, based on a countrywide poll, is a monthly measure of consumer confidence. The index is normalized to a score of 100 based on the value in December 1966. The index stood at 81.2 at the end of July and has since fallen to 70.2, the lowest weight since 2011 in the aftermath of the 2008 financial crisis.
This month’s score is lower than the lowest score of 71.8 during the lowest point of economic confidence in the early days of the COVID pandemic in April 2020. The survey’s chief economist referred to this month’s loss of faith as “stunning.”
The index includes a section on expectations for the future of the economy. That component fell from 79.0 to 65.2.
The component measuring confidence in the current condition of the economy fell from 84.5 to 77.9.
Only six more large losses between two surveys occurred in the previous 50 years, and all were directly related to rapid shifts in the broader economy. The two most notable drops were at the beginning of the COVID outage in April 2020 and the financial crisis in October 2008.
The drop in the index was widespread across subgroups based on age, income, race, and educational level. All geographic regions saw losses in confidence consistent with the overall index.
The survey’s chief economist also felt that the resurgence of the COVID epidemic through the Delta variant was a substantial contributing factor to the loss of confidence.
Economist and investment manager Peter Schiff expressed a different take in analyzing the steep drop in confidence when an increase had been projected. Based on the increasing reality of rising consumer prices, he summed up the situation. American consumers saw on Twitter as “Its #inflation stupid.”
As per Labor Department data released on August 12, producer prices rose at the fastest annual rate ever recorded, up 7.8 percent for the year ending in July. Analysts had predicted a yearly rate of 7.3 percent.