No crowds in Times Square after self-quarantine and social distancing was put in place in New York City. Image source: Felix Lipov © 123RF.com
The Conference Board in the United States released its monthly issue of the Consumer Confidence Index yesterday, measuring a drastic slump in April following the sharp decline a month prior.
According to the most recent findings of the index, US consumers' confidence in April has fallen below the market expectations of 88.3 to 86.9, due to the heavier toll the coronavirus crisis is exerting on the American economy as a whole.
The index has thus depreciated by 31.9 points on a monthly basis, down from the 118.8 points that were recorded for March. The decline is mostly attributed to consumers being worried about the arising uncertainty that is brought about by COVID-19's negative impact on markets and the economy.
Lynn Franco, Senior Director of Economic Indicators at the Conference Board, commented on the findings of the report by stating that:
"Consumer confidence weakened significantly in April, driven by a severe deterioration in current conditions. […] The 90-point drop in the Present Situation Index, the largest on record, reflects the sharp contraction in economic activity and surge in unemployment claims brought about by the COVID-19 crisis."
The implications from muted consumers' outlook could be significant for the gradual economic recovery in the States that is expected to occur as the Government starts to ease off restrictions, and plans of reopening the economy are now being put in place.
While these plans of getting the general economic activity back to speed have eased some of the consumers' tensions, the uncertainty in the labour market still looms large, with over 26 million people having filed for unemployment benefits since the beginning of the crisis.
Mr Franco goes on to argue in the report that these deteriorated employment conditions and the rising uncertainty, could force many consumers to refrain from spending much capital over the next several months.
The savings rate in the country is likely to increase markedly in the next quarter, which could slow down the economy's recovery process due to subdued consumers' activity.
This, in turn, would probably impact the US dollar negatively. The safe-haven currency, which has been bolstered by heightened demand globally, especially in emerging markets, would be weakened if the consumer spending rate in the states is diminished over the next several months.
At present, the greenback continues to be trading in a range against other major currencies in the short run. The EURUSD pair is still consolidating just below the descending resistance arrow, which we highlighted in our last 'Weekly Expectations' material.
EURUSD 1H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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