US Consumer Sentiment: Shoppers back home

Preliminary surveys for July point to a fresh downturn amid the coronavirus crisis. Another deterioration in the disease alongside bankruptcies could further plunge the US economy, Yohay Elam, an analyst at FXStreet, reports.

Key quotes

“The University of Michigan's preliminary Consumer Sentiment Index fell to 73.2 points in July, far below 79 expected and marginally above the initial coronavirus low of 71.8. Moreover, the forward-looking Expectations component plunged to 66.2, barely above the trough of 65.9 and far below 74 projected.” 

“Even with government support, these preliminary confidence figures may undergo a downward revision – especially as the virus rages. Moreover, August's statistics may be worse and hard data coming from July's retail sales and other economic indicators may also hit hard.” 

“The resurgence of the virus may already deal with a deadly blow. Businesses that got by renegotiating rent, using government support, and burning savings. Yet after the suffering and the return to normal, some may throw the towel in face of the second wave. Moreover, help from authorities may run out. Some of the benefits are set to expire on July 31. It is hard to see how politicians will squabble in an election year, but stranger things have happened.”

“It is essential to remember that apart from Congress' aid packages, the Federal Reserve also pumped liquidity into markets – an expansion of around $3 trillion to its balance sheet. The central bank may keep stocks bid –  but without companies making money, they may hit their high watermark as well.”