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Consumer Confidence Plummeted in April — But This Is Why Some Shoppers Are Starting to Feel Optimistic

While the coronavirus pandemic has caused consumer confidence to plummet over the last two months, American shoppers are feeling more optimistic about the days ahead, according to The Conference Board.

Following a sharp decline in March, The Conference Board Consumer Confidence Index for the U.S. slid further in April. It now stands at 86.9, compared with 118.8 in March. Further, the Present Situation Index, which is based on consumers’ assessment of current business and labor market conditions, took its largest fall on record, dropping by about 90 points, from 166.7 to 76.4.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board, noted that consumer expectations are likely to continue to fluctuate in the coming months due to “the uncertainty of the economic effects of COVID-19.”

“Consumer confidence weakened significantly in April, driven by a severe deterioration in current conditions,” said Franco. Over the past five weeks, more than 26 million Americans have filed jobless claims, with footwear and apparel retailers hit particularly hard. A growing list of industry players, ranging from Macy’s to Dick’s Sporting Goods, have announced furloughs and pay cuts for members of their executive and senior leadership teams, with companies also curbing spending and tapping into credit lines to preserve liquidity.

Despite the present economic challenges, consumers are feeling more optimistic about the economy in the short-term, according to The Conference Board. Its Expectations Index, which is based on shoppers’ short-term outlook for income, business and labor market conditions, rose to 93.8 points in April versus 86.8 in March. Further, the percentage of consumers expecting business conditions will improve over the next six months increased from 18.7% to 40% month-over-month. But those expecting business conditions will worsen also rose, from 16.4% to 25.7%.

“Consumers’ short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at- home restrictions will loosen soon, along with a re-opening of the economy,” Franco said. “However, consumers were less optimistic about their financial prospects and this could have repercussions for spending as the recovery takes hold.”

The improvement in short-term expectations comes as American leaders begin to roll out plans for reopening nonessential businesses after about five weeks of shutdowns. Earlier this month, the White House announced a three-phase process to restart the economy on a state-by-state basis. The plan keeps restrictions in place in the hardest-hit areas, with less-affected parts of the country able to begin easing rules if they can prove a downward trend of confirmed COVID-19 cases over a 14-day period.

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