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Delta Variant and Consumer Optimism

by: Aahoo Pourang

Concerns about the Delta Variant has dropped consumer sentiment to the lowest since 2011. Americans are more concerned about the economy’s future with the recent surge in coronavirus cases. According to the University of Michigan’s Preliminary Sentiment Index, data shows that optimism fell by 11 points to 70.2%, which is lower than pre-pandemic and the lowest since December 2011.

The decline in sentiment is due to consumers believing the pandemic will not end soon because of the delta variant looming over regular day-to-day life. Consumers are still tying a generalized negative view of the economy’s performance to the pandemic, but economists are saying that consumer confidence is not a reliable indicator of what’s next for the economy. Economists are also saying that sentiment was at an all-time high in 2007 right before housing market crash, so the low optimism is by no means a reason for the economy to crash.

Low sentiment may also be a reflection of frustration when a number of U.S. cities have re-imposed mask requirements, canceled multiple events, and have a number of citizens refuse to receive the vaccine. The hope that the pandemic would end soon has drastically decreased as hospitals are once again on a shortage of beds to handle patients.

Following the news of low sentiment, “gold has been caught in the crossfire” according to Victor Argonov, a senior analyst at Exante, after gold futures traded higher on Friday following sharp losses. Economists are saying the rebound in prices is due to investor recognition that the crash was short-term market manipulation.

While some right-winged economists believe that lockdowns are the biggest threat to the economy, the biggest threats may just be vaccine avoidance and mass media frenzy. After all, the stock market slipped after the report came out of low sentiment.

Reference: CNN website 08-2021