The University of Michigan’s consumer sentiment index dropped 2.8% to 76.8 for February. The monthly report cited households with incomes below $75,000 and broad uncertainty in the economy as the causes of the decline.
“The worst of the pandemic may be nearing its end, but few consumers anticipate the type of persistent and robust economic growth that restores employment conditions to the very positive pre-pandemic levels,” Richard Curtin, Survey of Consumers chief economist, said in a prepared statement.
The forecast for the indicator matched analyst predictions polled by Dow Jones and the Wall Street Journal, MarketWatch reported. The February index value is down 24% from the prior-year period, a hefty 24.2-point difference seen just before the ongoing coronavirus pandemic shocked the global economy.
Curtin noted that consumers surveyed for the indicator who did not hold a college degree reported less-favorable economic prospects.
“It is a common occurrence that groups that had suffered the least in a recession are the first to propel the economy forward,” he said, “although it is true that those whose jobs were in the hardest-hit sectors will be the slowest to fully recover.”
American political author and commentator Oren Cass told Consumers’ Research on Feb. 24 that a cultural and policy emphasis on higher education has made it more difficult for Americans to thrive in non-college pathways.
In a graph attached to the monthly report, economic expectations for consumers with a high school degree or less were at an all-time low for the prior-year period. Consumers with a college degree reported fairly consistent confidence since December 2020.
Inflationary fears also played a role in the survey, though Curtin said that the expectation of inflation becoming a “self-fulfilling prophecy” among consumers was non-existent.
“The key lesson learned from the last inflationary era is that it is easy to underestimate the strength of inflationary psychology, and correspondingly, it is easy to overestimate the ability of economic policies to bring an end to inflationary psychology,” said Curtin.
In recent weeks, inflation dread has mounted as Federal Reserve policies and stimulus aid have marginally brought the economy back from its plunge a year ago.
The index, developed in 1966, surveys at least 500 consumers by telephone and asks fifty core questions on consumers’ income and confidence in the economy.
