Consumer confidence has plummeted alongside increasing fears about the spread of the coronavirus, according to new figures released Thursday.
Since the beginning of the year, Morning Consult's consumer sentiment index is down 3.72 percent, with much of that decline since the coronavirus began spreading domestically in late February. The index is down 0.6 percent from Wednesday.
While the index reading of 110 is the same as figures from November, Morning Consult economist John Leer said the sudden, steep drop is more significant to the U.S. economy.
“In general, the change in the value over time is more interesting,” he said Thursday.
Consumer spending accounts for almost 70 percent of the U.S. economy. A drop in consumer confidence is often viewed as an indicator of reduced spending.
In recent weeks, financial markets have plunged, ending an 11-year bull market that began after the Great Recession. Major sporting events, entertainment venues and schools in some states have closed in response to the coronavirus. The travel and hospitality industries have been particularly hit hard.
According to Leer, consumer sentiment dropped at a similar pace two other times in recent years. The first was in December 2018, when the Federal Reserve boosted interest rates as the economy was slowing and a trade war with China was heating up. The other decline occurred in August 2019, when President TrumpDonald TrumpUkraine's president compares UN to 'a retired superhero' Collins to endorse LePage in Maine governor comeback bid Heller won't say if Biden won election MORE ratcheted up his trade war with China and threatened to impose steep new tariffs on consumer goods.
Both downturns were temporary, however, as policymakers backed off their positions.
“In both of those times, economic growth was on shaky grounds, and it took a long time for consumer confidence to rebound, as well as a change in policy,” Leer said. “This case, for me, is really worrisome because it’s unclear what policymakers can do to reverse the trend."