- Preliminary readings from the University of Michigan's consumer-sentiment gauge shows the index erasing recent gains amid new coronavirus outbreaks.
- The university's index of consumer sentiment fell to 73.2 in July from 78.1 in June, and respondents' view of economic conditions sank to 84.2 from 87.1.
- "The widespread resurgence of the coronavirus" is to blame for the surprise drop, said Richard Curtin, the chief economist for the Surveys of Consumers.
- "Another plunge in confidence and a longer recession is likely" if Congress doesn't soon pass another fiscal stimulus bill, he added.
The University of Michigan's consumer-sentiment gauge snapped a two-month uptrend in July, offering an early sign that new coronavirus outbreaks are reversing the economic recovery.
The university's index of consumer sentiment fell to 73.2 from June's reading of 78.1. Respondents' view of economic conditions sank to 84.2 from 87.1. The index of consumer expectations posted the biggest decrease, falling to 66.2 from 72.3 through the month.
Economists surveyed by Bloomberg had expected the consumer-sentiment gauge to modestly increase to 79.
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"Consumer sentiment retreated in the first half of July due to the widespread resurgence of the coronavirus," Richard Curtin, the chief economist for the Surveys of Consumers, said in a release.
Curtin added: "Unfortunately, declines are more likely in the months ahead as the coronavirus spreads and causes continued economic harm, social disruptions, and permanent scarring."
Friday's readings are preliminary. The final data is set to be released on July 31.
The surprise decline arrived as lawmakers debate another fiscal stimulus bill. Senate Majority Leader Mitch McConnell has indicated he wants to keep the package below $1 trillion. House Majority Leader Nancy Pelosi said on Thursday that a virus relief bill in the works was already set to spend $1.3 trillion, adding that the sum was still "not enough."
Congress has days to pass a bill before the $600-a-week expansion to unemployment benefits expires.
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An "aggressive fiscal response is urgently needed," Curtin said. But the virus' continued spread and looming policy deadlines threaten to harm consumer sentiments before they resume their climb back to pre-pandemic levels.
"Unfortunately, there is little time left on the political calendar for Congress to act as the election season is about to begin in earnest," Curtin said. "Without action, another plunge in confidence and a longer recession is likely to occur."
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