Consumer confidence has fallen again for the second month in a row, as the country continues to grapple with the coronavirus pandemic.
“The consumer is the most worried they have been all year which pours cold water on the idea that the economic recovery is sustainable,” Chris Rupkey, chief financial economist at MUFG, wrote in a note on Tuesday.
He added: “America is not winning this war with recession yet and Washington may be hurting the recovery more than helping the economy after stopping the $600 weekly unemployment checks prematurely at the end of July.”
The consumer confidence index sank to 84.8 in the month of August, down from a revised 91.7 reading in July, according to The Conference Board. This is the second straight month in decline.
Comparing the number to past years, 84.8 is an even lower reading than the April low of 85.7, which was right in the heat of the COVID-19 outbreak. This is the lowest level it’s dropped since 2014.
“It is a pretty big decline,” Bart van Ark, chief economist at The Conference Board, told Yahoo Finance’s “The First Trade.” “We were a bit surprised because we’ve seen the [COVID-19] situation, particularly in the south of the country, improving somewhat over August, so we had expected that would translate itself into better results.”
He added that the pullback in spending is indicative of a “second phase of this recession,” where even though consumers are no longer asked to stay home, “people [are getting] concerned about the fiscal stimulus that may not come… [and] people are really worried.”
Recovery may not be smooth
President Donald Trump has addressed those concerns, issuing a memo that provides states with an extra $300 of weekly jobless benefits, since the additional $600 of additional weekly benefits expired at the end of July.
Consumers’ concern could “give us a little bit of a contraction in the economy,” Van Ark stated, which could show up in the fourth quarter.
But all that could change, he added, if it seems as though things are returning to normal, and we have the virus “under control.”
But looking at the data right now, Rupkey warned of a bumpy road ahead.
“Net, net, the consumer is losing confidence in August and this changes the green light of the recovery from the pandemic recession to a slower yellow caution signal as the lack of additional fiscal stimulus and the coronavirus spread through new communities is taking a toll,” he wrote.
Aarthi is a reporter for Yahoo Finance. Follow her on Twitter @aarthiswami.