2021 Consumer Confidence Trends

In a report on Friday, economists from the University of Michigan said a key consumer sentiment measure declined significantly in early August. The consumer sentiment index fell to 70.2 earlier this month, down more than 13% from July’s reading of 81.2.

The sudden drop, which experts described as “rare,” suggests that the Delta variant may be creating uncertainty about what lies ahead for the economy. The reading represents a low not seen since 2011. 

“Over the past half century, the Sentiment Index has only recorded larger losses in six other surveys, all connected to sudden negative changes in the economy,” Richard Curtin, the chief economist for Michigan’s Surveys of Consumers, said in a release.

Delta variant impact

Curtin said the drop could have been spurred by the rise in cases of the Delta variant. The surge in cases has prompted some states and localities to reintroduce mask mandates and other restrictions. 

He added that consumer confidence could rebound in the months ahead, especially if matters stabilize on the pandemic front. 

“Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end,” Curtin said. “In the months ahead, it is likely that consumers will again voice more reasonable expectations, and with control of the Delta variant, shift toward outright optimism.”

Although the early August consumer sentiment index suggests uncertainty among consumers, other metrics -- including weekly jobless claims -- have suggested that the economy is recovering from its pandemic lows. The Labor Department said recently that the economy added 943,000 jobs last month, which is more than most economists expected. 

With millions of Americans now vaccinated and eligibility open to just about everyone, consumers have decided things are looking up. The Conference Board’s Consumer Confidence Index rose sharply in April.

The monthly measure of how consumers are feeling about the economy checked in at 121.7, a substantial gain from 109 in March. Much of the overall gain was based on how consumers feel right now. 

The Present Situation Index — based on consumers' assessment of current business and labor market conditions — jumped from 110.1 to 139.6. However, consumers are less certain about the future. The Expectations Index showed only a slight gain from March to April.

Lynn Franco, senior director of Economic Indicators at The Conference Board, says the index that measures consumer’s confidence about their financial standing is at its highest level since February 2020, just before the coronavirus (COVID-19) pandemic brought the economy to an overnight standstill.

"Consumers' assessment of current conditions improved significantly in April, suggesting the economic recovery strengthened further in early Q2,” Franco said. “Consumers' optimism about the short-term outlook held steady this month.”

Jobs and stimulus checks

Franco said there could be a couple of factors driving the optimism. Job prospects are improving as businesses are actively looking for employees. And it doesn’t hurt that most consumers by now have received the latest round of stimulus checks.

“Vacation intentions posted a healthy increase, likely boosted by the accelerating vaccine rollout and further loosening of pandemic restrictions," Franco said.

But while there was a big increase in the percentage of consumers who think business conditions are good and jobs are plentiful, that optimism doesn’t carry too far into the future.

The percentage of consumers who think business conditions will improve over the next six months increased, but only slightly -- from 40.3% to 40.5%. Only 11.9% think things will get worse in that time but that’s the same percentage as March.

The percentage of consumers predicting an increase in jobs in six months actually declined, from 35.9% to 34.5%.

The possibility that cryptocurrencies could become a part of everyday life has received a major vote of confidence. In a new report -- “Bitcoin At the Tipping Point” -- Citigroup suggests that the virtual currency could become “the currency of choice for international trade” if all continues to go well for it. The company says that step could be the start of a “massive transformation of cryptocurrency into the mainstream.” 

And if things don’t go well? The Citigroup team says that “speculative implosion” could happen. Analysts explained the potential failure, saying that there are “a host of risks and obstacles that stand in the way of Bitcoin progress. But weighing these potential hurdles against the opportunities leads to the conclusion that Bitcoin is at a tipping point.”

According to the report, Bitcoin’s enormous upside has been driven by recent aggressive moves by companies like Tesla, which invested $1.5 billion in the currency, and Mastercard, which has decided to accept some cryptocurrencies as payments later this year.

“Gold is dead”

The Citi report explains that Bitcoin has worked its way through several stages so far:  technological oddity, censorship-resistant money, and digital gold. It’s that last part that has many analysts cheering the cryptocurrency on, primarily because there is a current lack of alternative gold-like assets. The company says the need for those will only continue to grow. 

“Because of what is going on in the world, besides there being a growing need for money or storehold of wealth assets that are limited in supply, there is also a growing need for assets that can be privately held. Because there aren’t many of these gold-like storehold of wealth assets that can be held in privacy and because the sizes of their markets are relatively small, there exists the possibility that Bitcoin and its competitors can fill that growing need,” Dalio wrote.

The biggest question with Bitcoin, Dalio says, is what it can realistically be used for and what amount of demand it will have. “Since the supply is known, one has to estimate the demand to estimate its price.” While gold can be mined from the earth, bitcoin can only be mined via computational means. Bitcoin’s source code dictates a limited and finite supply of 21 million bitcoins that will ever be produced. 

Billionaire Mark Cuban’s take on the gold vs. bitcoin debate is that the former is "dead.” In a debate with gold lovers on Twitter, he explained his stance this way: “Gold is hyped as much as Crypto. Do we really need gold jewelry? Gold can make you a ring. (Bitcoin and Ethereum) are technologies that can make you a banker, allow friction free exchange of value and are extensible into an unlimited range of biz and personal applications”

The truth is, Cuban doesn’t see gold as having much of a future and will eventually die as a “store of value” (SOV). "What we are seeing built w/crypto today is just proof of concept. As tech continues to get better/cheaper/faster there will be new applications and maybe even something that supersedes what we know as crypto today," Cuban tweeted. "But Gold won't ever change. Which is why it will die as a SOV." 

Cuban ended his debate with a reminder that gold, like bitcoin, was also an SOV built on “mining” technology. “From picks and shovels to mining operations that keep trying to improve. Whoever could use the tech of the day to find and mine the most efficiently was the most rewarded. Much like Crypto is today," he concluded.

Consumer confidence increased slightly in January, despite the fact that cases of the coronavirus (COVID-19) are increasing and U.S. deaths from the pandemic surpassed 400,000 this month.

The Conference Board’s monthly Consumer Confidence Index rose to 89.3 this month after falling to 87.1 in December. Lynn Franco, senior director of Economic Indicators at The Conference Board, said the monthly survey shows consumers are well aware of the current challenges posed by the pandemic but are hopeful about the future.

"Consumers' expectations for the economy and jobs advanced further, suggesting that consumers foresee conditions improving in the not-too-distant future,” she said. “In addition, the percent of consumers who said they intend to purchase a home in the next six months improved, suggesting that the pace of home sales should remain robust in early 2021."

But all of that optimism may be months away from being realized. The Present Situation Index – based on consumers' assessment of current business and labor market conditions – fell this month from 87.2 to 84.4. The Expectations Index – based on consumers' short-term outlook for income, business, and labor market conditions – increased from 87.0 in December to 92.5 this month.  

For example, the percentage of consumers saying business conditions are "good" increased from 15.4 percent to 15.8 percent, but those claiming business conditions are "bad" also increased, from 39.7 percent to 42.8 percent. 

Hopes for a better job market

With unemployment claims rising over the last month, consumers' assessment of the labor market was also less favorable. The percentage of consumers saying jobs are "plentiful" declined from 21.0 percent to 20.6 percent, while those claiming jobs are "hard to get" rose from 22.9 percent to 23.8 percent.

The bright spot in the survey is the short-term future. The percentage of consumers expecting business conditions to get better over the next six months rose from 29.5 percent to 33.7 percent. The percentage of consumers expecting business conditions will worsen decreased from 22.0 percent to 18.1 percent. 

Even though the labor market appears to have gotten worse over the last four months, consumers expect that to get better as the coronavirus vaccine becomes more widely distributed. The percentage of consumers expecting a better job market in the next six months rose from 28 percent in December to 31.3 percent this month.