US consumer confidence rose more than expected in June 2020 as stay-at-home and quarantine restrictions loosen, according to data published Tuesday.
The Conference Board’s US consumer confidence index rose to 98.1 for June 2020. According to economists surveyed by Dow Jones, consumer confidence was expected to increase to 91 from a May reading of 85.9.
“The re-opening of the economy and relative improvement in unemployment claims helped improve consumers’ assessment of current conditions,” said Lynn Franco, senior director of economic indicators at The Conference Board.
However, Franco stressed that “the Present Situation Index suggests that economic conditions remain weak. Looking ahead, consumers are less pessimistic about the short-term outlook, but do not foresee a significant pickup in economic activity.”
“Faced with an uncertain and uneven path to recovery, and a potential COVID-19 resurgence, it’s too soon to say that consumers have turned the corner and are ready to begin spending at pre-pandemic levels,” said Franco.
The Board's present situation index increased to 86.2 from 68.4 while the short-term outlook among consumers also moved up.
States across the country have improved efforts to reopen the American economy by loosening some measures aimed at curbing the coronavirus pandemic. This not only improved consumer confidence, but made stock prices soar. However, some states have had to halt their reopenings as coronavirus cases had a spike once again.
In May, Visa was able to trace higher consumer spending as the economy recovers. This observation came after total US payments volume fell at a slower pace.
Visa’s total payments volume moved slower in May from the previous month. Analysts believe this signals that consumer spending was recovering as the government starts to lift coronavirus lockdowns.
US payments volume in May fell to 5%, compared with an 18% fall in April.
Meanwhile, quarter-to-date, Visa reported an 11% decline in payments volume, the company said in a filing on Monday.
There was a 45% decline in cross-border volumes, excluding intra-Europe transactions, that drive its international transaction revenue. On the other hand, global processed transactions dropped 12%.
Economic recovery
Economic recovery depends on the level of consumer fear, according to economists as the services sector leads the recession the US is experiencing.
They believe that individual psychology, consumer confidence, and the success of government in filling the income gap for unemployed individuals all play a role in reviving the economy.
Consumers’ discretionary spending for industries like dining, travel, and entertainment will determine how these parts of the economy will carry on.
Consumers stopped spending and saved more than 13.1% of their income, the most in 45 years, when they were forced to stay inside their homes.
How consumers would spend the saved cash for a recovery depends on their confidence in the economy and their jobs.
“It’s much more behavioral. It’s driven by fear,” said Diane Swonk, chief economist at Grant Thornton. Economists use China as a basis for their analysis, since the disease began there.
“Even a month after they reopened in Wuhan, people are still worried about going to public places and malls.”
When Georgia allowed businesses to reopen, consumers reacted with hesitancy. “There’s a fear about reopenings and visiting places,” she said. “The malls opened to a lot of fanfare, advertised like crazy, but few people showed up.”
