The numbers: Americans are worried about the record rise in coronavirus cases, but Democratic party euphoria over Joe Biden’s presidential election drove consumer sentiment in early December close to a pandemic high.

The first of two readings in the consumer sentiment index for December rose to 81.4 from 76.9 in the prior month, the University of Michigan said Friday.

Economists polled by MarketWatch had forecast the index to slip to 75.5.

The December reading almost matched the results in October, which were the highest since the Covid-19 epidemic erupted.

The rise in sentiment, however, runs counter to a flurry of economic indicators signaling a deterioration in the economy.

The number of new jobs regained in November fell to a seven-month low, for one thing, and jobless claims jumped to a nearly three-month high as more workers were laid off due to rising government restrictions on business and limits on public gatherings.

The soaring coronavirus caseload threatens to deliver a big setback to the economy at the end of 2020 even as drugmakers rush to make a handful of vaccines available to slow the epidemic.

What happened: An index that measures current conditions increased to 91.8 from 87 in November. That’s a nine-month high.

An index that measures expectations for the next six months also rose to 74.7 from 70.5.

” Consumer sentiment posted a surprising increase in early December due to a partisan shift in economic prospects,” said Richard Curtin, chief economist of the survey. “Following Biden’s election, Democrats became much more optimistic, and Republicans much more pessimistic, the opposite of the partisan shift that occurred when Trump was elected.”

The euphoria among Democrats might not last long, however, or be reflective of the country as a whole.

Other surveys such as the long-running consumer confidence index from the Conference Board and a daily report by Morning Consult have shown a decline in consumer confidence more broadly. The Morning Consult report is part of the MarketWatch Coronavirus Recovery Tracker.

Big picture: Declining consumer confidence typically leads to declining consumer spending, setting off a chain reaction that damages the broader economy. Businesses hire fewer people or even cut jobs as a result and investment goes south.

The economy already appears to have weakened considerably in the past month and it could get even worse in the next month or two, but it’s likely to rebound early next year if the vaccines prove effective.

What could help bridge the gap is another major federal aid package from Congress after months of political stalemate. Worsening economic conditions are pressuring lawmakers to extend unemployment benefits and provide more help for struggling businesses.

What they are saying? “The shift in sentiment reflects the expectation of a big shift in economic policies in the Biden Administration vs. those of President Trump, but all of this comes against the backdrop of continued concern about Covid,” said senior money market economist Thomas Simons of Jefferies LLC.

Market reaction: The Dow Jones Industrial Average
DJIA,
-0.20%

and S&P 500
SPX,
-0.54%

fell in Friday trades.


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