The U.S. economy can’t move： consumer confidence has hit a six-year low, so how can we recover if we dare not spend money？ !
On August 25th, local time, the latest data released by the American Conference Board showed that the American consumer confidence index continued to decline in August, from 91.7 in July to 84.8, a six-year low. Economists believe that consumers are increasingly worried about the economic prospects and personal financial situation of the United States, which has poured cold water on those views that the American economy can achieve a sustainable recovery.
Reuters reported that the US consumer confidence index hit a six-year low, highlighting concerns about economic recovery.
Consumer pessimism is on the rise
According to the report of the American Conference Board, the consumer confidence index of the United States reported 84.8 in August, which declined for two consecutive months, not only lower than the market expectation of 93, but even lower than the 85.7 when the epidemic raged in April, setting the lowest level since 2014. In July, the consumer confidence index dropped from 92.6 to 91.7.
At the same time, the consumer status index in August fell from 95.9 in July to 84.2, and the consumer expectation index fell from 88.9 in July to 85.2.
The report shows that consumers are pessimistic about the short-term prospects. In fact, some respondents believe that it is unlikely to make large purchases in the short term. It is estimated that the proportion of people buying large household appliances will drop to 44.8%, the lowest since 2015, and the proportion of people planning to buy cars will drop to 9.7%.
In addition, the proportion of consumers whose income is expected to increase decreased from 14.8% in July to 12.7% in August, and the proportion of consumers whose income is expected to decrease increased from 15.8% in July to 16.6% in August. The proportion of consumers who think it is difficult to get job opportunities rose from 20.1% in July to 25.2% in August.
For a series of pessimistic data, Lynn Franco, senior director of economic indicators of the American Economic Conference Board, said: "Consumer spending has rebounded in recent months, but consumers’ concerns about the US economic prospects and their own financial situation have intensified, which may lead to a cooling of spending in the next few months.
The consumer confidence index (black line) of the American Conference Board fell sharply after the outbreak, and it reported 84.8 in August, which has been falling for two consecutive months.
"Poured cold water on the idea of sustainable recovery"
According to Reuters’s analysis, the American Conference Board reported that the consumer confidence index had fallen for two consecutive months, which cast a shadow over the new housing sales data released on the same day and reached a new high in the past 14 years.
According to the latest data released by the U.S. Department of Commerce on August 25th, the sales of new homes in the United States increased by 13.9% in July this year, reaching 901,000 households, significantly exceeding the market expectation of 785,000 households, hitting a new high since December 2006. In June, the total sales of new homes in the United States increased from 776,000 to 791,000.
It should be pointed out that the performance of new home sales data in the United States rising for several months in a row is somewhat abnormal from the economic fundamentals. Analysts pointed out that this is inseparable from the Federal Reserve’s quantitative easing policy, because the low interest rate environment has stimulated the demand for American housing.
According to the data of Freddie Mac, a mortgage financing institution, the interest rate of 30-year fixed mortgage is currently 2.99% on average, which is close to the level in the early 1970s. Lawrence Yun, chief economist of the American Association of Realtors, pointed out: "The record low mortgage interest rate is bringing more buyers into the market."
"Today’s data tells us that although some lucky workers can buy new houses, millions of people can’t afford the necessities and rent, especially after the federal government cancels the extra unemployment allowance of $600 a week." Chris Rupki, chief economist of Mitsubishi UFJ Financial Group in new york, said, "Consumers are in the most worrying period in a year, which has poured cold water on the idea of sustainable economic recovery."
Bloomberg said that the COVID-19 epidemic dragged down American consumer confidence to a six-year low.
Weak consumption drags down economic recovery.
According to a survey released by the Federal Reserve Bank of new york, Americans have become more pessimistic in July after the prospect of the labor market improved for two consecutive months. According to the survey, consumers believe that the average possibility of losing their jobs in the next year will rise from 15% in June to 16% in July, which is higher than the average level of 14.3% in 2019.
As the American people are struggling to cope with the high unemployment rate, the difficult delivery of the new round of rescue plan and the uncertainty brought by the US election, it is normal for them not to dare to spend money, and consumer confidence will inevitably be affected. In particular, the stalemate between the two parties in Congress on the new round of bailout bill has had an impact on the US retail market.
After the expiration of the first round of rescue measures, although various localities have begun to issue "scaled-down" additional unemployment benefits in accordance with President Trump’s executive order on August 8, as the weekly subsidy amount has been reduced to $300, economists estimate that this will reduce the retail sales in August by about $50 billion, and at the same time, it will be the main driving force for the US economy — — Consumer spending forms a constraint.
Some economists have previously written to American policymakers, calling for automatic payment of stimulus subsidies based on specific economic indicators such as unemployment rate until there is sufficient evidence that the economy is recovering. "In the first round of economic shock, direct cash distribution was life-saving money to help many people survive the difficulties for several weeks." These economists wrote, "Even after enterprises start to resume work and employment begins to recover, there will still be obvious economic follow-up effects. If people have no money to spend, demand will continue to be sluggish."
Personal consumption expenditure accounts for about 70% of the U.S. economy, which is the main engine driving the U.S. economic growth and the key pillar to maintain market confidence. Economists generally believe that it is difficult for American consumer spending to return to normal levels in the short term, considering that a large number of Americans have exhausted their income and lack confidence in health and safety. In this case, as Federal Reserve Chairman Powell pointed out earlier, it is impossible for the US economy to fully recover until the public is convinced that the epidemic is under control.
"With the weakening of consumer confidence, stagnant employment growth and the reduction of federal unemployment benefits, there may be a period of weak economic activity without more support measures." James Knightley, chief international economist of ING, said, "This strengthens our view that a V-shaped recovery will not happen, and the US economy is unlikely to recover all the lost economic output before mid-2022." (CCTV reporter Gu Xiang Yin Yue)