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March 31, 2020, 10:54 a.m. EDT

Consumer confidence sinks in March to a 32-month low and it’s going to keep falling

Consumer confidence index drops to 120 in March from 132.6

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By Jeffry Bartash, MarketWatch

Getty Images
People social distance as they wait to get into the Trader Joe's store to avoid the spread of COVID-19 in Michigan. Consumer confidence is sinking as the virus spreads and shuts down large parts of the economy.

The numbers: Consumers started to rapidly lose confidence in the economy in March as a deadly coronavirus spread, a new survey shows, and it’s likely to plunge a lot more in the months ahead as millions are thrown out of work and the U.S. sinks into recession.

The closely followed index of consumer confidence fell to 120 in March from a revised 132.6 in February, the Conference Board said Tuesday .

Similarly, a daily survey by Morning Consult and the consumer-sentiment index in March have also plunged.

What happened: An index that gauges how consumers felt about the economy in March only slipped a few points to 167.7, but that was because the full extent of the damage wasn’t evident by the time the survey was completed. The cutoff date for the results was March 19.

Another gauge that assesses how consumers view the next six months — the so-called future expectations index — fell more sharply. It dropped to 88.2 from 108.1 as the threat from the pandemic began to dawn on Americans.

Confidence is going to keep falling until the coronavirus outbreak is contained, potentially sinking to levels last seen in the 2007-2009 Great Recession. The confidence index bottomed out at 25.3 in early 2009 — a historic low.

Read: Record surge in the number of Americans getting laid off is just getting under way

Big picture: The U.S. economy was in very good shape just a few months ago, but a recession is now underway and a huge contraction is expected in the second quarter that runs from April to June.

It could be quite some time before confidence returns to a pre-crises peak of 137.9 in 2018. Many economists think a full recovery might not begin until next year and it could take awhile, depending on how long the economy is shut down. The longer the crisis, the deeper the downturn and longer the return to normal.

Read: Why Friday’s jobs report won’t tell the full story of an economy being driven into recession

What they are saying? “March’s decline in confidence is more in line with a severe contraction — rather than a temporary shock — and further declines are sure to follow,” said Lynn Franco, senior director of economic indicators at board.

“This report, along with the earlier downward revision to the March University of Michigan consumer sentiment index, is in all likelihood just a taste of the steep declines that loom ahead,” said chief economist Joshua Shapiro of MFR Inc.

Market reaction: The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.06% and S&P 500 /zigman2/quotes/210599714/realtime SPX -0.31% fell in Tuesday trades. The Dow has lost about a quarter of its value in the last month and a half.

The 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.12% slipped again to 0.69%.

US : Dow Jones Global
+15.08 +0.06%
Volume: 78.44M
Sept. 23, 2020 10:14a
-10.33 -0.31%
Volume: 371.94M
Sept. 23, 2020 10:14a
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
+0.0008 +0.12%
Volume: 0.00
Sept. 23, 2020 10:14a

Jeffry Bartash is a reporter for MarketWatch in Washington.

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