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Consumer Sentiment in U.S. Declines, Hits Decade Low

The consumer sentiment in the United States declined to a decade low in August not seen since 2011, according to the University of Michigan’s index. Consumer sentiment can highly affect business and economic activity. The lower it is, the more the possibility that economic activity will falter. This new index reading reveals that consumers have worries over the economy, including factors such as inflation, employment, finances, and more. 

According to the University of Michigan — who conducted the survey — the consumer sentiment index declined to a reading of 70.2 for the beginning of August, a swift drop from July’s 81.2 reading. This decline is the lowest level consumer sentiment has been at in about a decade, since 2011. Only two larger drops have ever been recorded in the last 50 years: a drop during the 2007 – 2009 recession, and a drop during the beginning of the April 2020 shutdowns.

This surprise decline is not what economists forecasted for the beginning of August, as most believed that the consumer sentiment index would not change at all from the previous month. Therefore, this is perhaps the first major sign that current situations in the United States, most notably the Delta variant of the COVID-19 virus, are beginning to affect or influence American consumers, which in turn could affect the economy.

In the past two weeks alone, Delta cases have doubled to a new six-month record, which has worried many Americans and caused many companies to put mask regulations for employees and customers back in place. Many regulations that went away during the summer of 2021 also came back into place, as the Delta variant can quickly spread.

This new data from the University of Michigan could impact what is to come in the United States economy. Thus far, the Delta variant hasn’t yet fully affected the economy — at least, not how COVID-19 first did back in 2020. Companies and consumers, having lived in a pandemic for more than a year now, know what to expect almost when it comes to a rise in infections. However, now it does appear that the Delta variant is causing some economic worry.

Last week, airline companies and other travel-related businesses began to warn their investors of a potential drop or slowing of profits for the upcoming quarter as many people began canceling their travel plans, or not booking at all. Southwest Airlines and Airbnb are two notable companies that spoke about these warnings. Now, it appears that the Delta variant could begin to affect economic activity in a variety of industries.

According to many economists, this new drop in consumer sentiment could be a result of the fact that many American consumers assumed we were out of the pandemic, as many became fully vaccinated, and many regulations went away. Now that Delta is causing cases to soar around the nation, it’s disheartening to realize that the pandemic is ongoing — and that we all won’t be going back to “normal” as soon as we all thought.

However, even with all of this, economists still expect economic growth to occur for 2021. The Delta variant quickly changed things, but factors later on in the year could change to improve business activity once again. Earlier this year, economists forecasted that the United States’ economic growth will be the fastest growth in four decades. So far, this forecast still stands.

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