WASHINGTON (Reuters) – U.S. consumer sentiment perked up in early June as households cheered the reopening of businesses and a surprise rebound in hiring, though they did not expect a significant improvement in the economy amid fears of a resurgence in COVID-19 infections.
FILE PHOTO: A shopkeeper works inside his retail store as the phase one reopening of New York City continues during the outbreak of the coronavirus disease (COVID-19) in the Brooklyn borough of New York City, New York, U.S. June 9, 2020. REUTERS/Shannon Stapleton
The survey from the University of Michigan on Friday is broadly in line with economists’ expectations that the recovery from the recession would be a long slog. The National Bureau of Economic Research, the arbiter of U.S. recessions, declared on Monday that the economy slipped into recession in February.
“While uncertainty about the future is beginning to ease, it is still higher than it was at anytime during the Great Recession,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “That raises questions about the willingness to purchase big-ticket items. If we don’t see that happen, the recovery will be slower than hoped for.”
The University of Michigan’s consumer sentiment index increased to a reading of 78.9 from 72.3 in May. It said “few consumers anticipate the reestablishment of favorable economic conditions anytime soon.” Two-thirds of consumers in the survey expected “bad times financially” during the year ahead, while half anticipated a “renewed downturn.”
In addition to concerns about a second wave of COVID-19 infections, consumers also worried that persistently high unemployment could slow the economic recovery. Though the economy created 2.5 million jobs in May, an employment gap of nearly 20 million remains since March when nonessential businesses were shuttered to slow the spread of COVID-19.
Layoffs are more than double their peak during the 2007-09 Great Recession.
Economists polled by Reuters had forecast the sentiment index would rise to 75 early this month.
While the University of Michigan survey showed consumers’ inflation expectations easing slightly in June, they remained above their pre-COVID-19 shutdown levels. Consumers’ one-year inflation expectations slipped to 3.0% from 3.2% in May. Five-year inflation expectations dipped to 2.6% this month from 2.7%.
Consumers’ inflation perceptions in the past months have been driven by higher food prices, amid meat shortages caused by COVID-19 outbreaks at processing plants.
“That provides some reassurance that the recent plunge in prices for travel-sensitive services like airline fares and motor vehicle insurance will not lead to a more widespread period of falling prices,” said Andrew Hunter, a senior U.S. economist at Capital Economics.
Stocks on Wall Street were trading higher, recouping about half of the previous session’s sharp losses. The dollar rose against a basket of…
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