Consumer confidence remains in the doldrums this month as the COVID-19 delta variant generates increased economic anxiety.
The University of Michigan index of consumer sentiment increased slightly to 71.0 in early September, from its 70.3 level in August, according to a preliminary update released Friday. The subtle uptick fell below consensus expectations it would rise to 72.
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Forecasters were surprised when sentiment plunged to its lowest level in a decade last month, shedding nearly 13.5% of July’s 81.2 level. The delta variant has caused new headaches for the recovering economy. Even during the height of the pandemic in the spring of 2020, consumer confidence was not as low as it is now.
“The steep August falloff in consumer sentiment ended in early September, but the small gain still meant that consumers expected the least favorable economic prospects in more than a decade,” said Richard Curtin, director of the survey.
August’s precipitous tumble represented the third sharpest drop, after April 2020, when it declined 19.4%, and during the 2008 recession, when it fell 18.1% in October of that year.
For reference, consumer sentiment averaged 81.5 in 2020, 96 in 2019, and 98.4 in 2018. The measure ballooned as high as 101 in February of last year as the U.S. economy reached its peak and had only a 3.5% unemployment rate.
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The news comes after the August jobs report fell well short of what economists were hoping for. The economy added just 235,000 new jobs last month, far beneath the 750,000 that were expected. The overall unemployment rate dropped slightly from 5.4% to 5.2%.
Last week, Goldman Sachs revised down its gross domestic product forecast for 2021 from 6.2% to 5.7%, and Wells Fargo also revised down its third-quarter GDP estimate by 2.25 percentage points to 4.6%. It also cut its fourth-quarter projections slightly to 5.7%.
