Is US consumer confidence ready to beat the expectations? – Guest Analysis

Ramy Abouzaid

ATFX’s Ramy Abouzaid says that the main challenge is that when there’s a hard stop on the economy, it’s difficult to get it restarted, and with an artificial boost and a switch in consumer’s way of spending it is really hard to predict future consumer behavior patterns

european markets

By Ramy Abouzaid, ATFX (CY) Dubai Rep Office Head of Market Research.

In an economy driven by personal consumption, consumer confidence is key in predicting the magnitude and timeframe of future recoveries, it is enough to mention that nearly 70% of 2019 GDP in the US was driven by personal consumption to understand the importance of the data – The index is composed of consumers’ assessment of present conditions and expectations about the future.

That 70% drive in GDP is rarely bothered by complicated economic data though, except one; unemployment. If we look at April’s figures with 20.5 million jobs lost, consumer confidence index fell to a nearly six years low to 86,9 down from 118.8 in March. When we combine unemployment or fear of losing a job with the continuous spread of COVID-19, it is evident that people will hold back on spending and are less likely to feel confident spending beyond necessities. With markets reopening and some states lifting lockdown restrictions, some would bet on seeing better figures in May report but the drop in consumer confidence is more likely to linger for the upcoming quarters.

According to the Primary Consumer Sentiment Index published by Refinitiv’s Ipsos for the month of May – which gives insight on consumers perception and expectation on current and future economic conditions, the results show a fall of 2.4% from last month with a 17.2% drop over a year. It is also important to mention that a decline of 31.7% is expected in the U.S. Retail and Restaurant Q1 2020 earnings and is expected to drop to 65.5% in the second quarter.

Another keynote to consider is that during the month of April, reopening in some states didn’t boost consumers’ confidence, and retailers across all 50 states were already less optimistic about the economy even before any of the states applied full lockdowns. 

So even post-lockdowns consumer’s confidence is going down? 

Opinions seem divided on lockdowns lifting, some fear a resurgence of new waves of the virus, others believe it is the first step to reach a U-shape recovery in the economy. These mixed feelings stabilized consumer confidence across most states in mid-April before the first states began reopening their economies. For the past month, reopening hasn’t contributed to a spike in new cases, which would lead some “orthodox believers” in lockdowns to go easy and feel more confident in taking part in the economy. Based on that, we believe a slow but steady growth in consumer confident might be reflected in May report.

For the next quarter though, any update on a COVID-19 vaccine or treatment, as well as monetary stimulus from the Federal bank, would give a major boost for consumer confidence. And with many pharmaceutical companies showing promising first stage experiments, and with the Fed “ready to do more”, attitude it seems we have a glimpse of hope in the next quarters after all.

The main challenge though, is that when there’s a hard stop on the economy, it’s difficult to get it restarted, and with an artificial boost and a switch in consumer’s way of spending it is really hard to predict future consumer behavior patterns, and there’s nothing more worrying to the markets then uncertainty. 

  • Read this next

    Retail FX

    Weekly Roundup: FX prop firms switch to cTrader, who moved $1.35B BTC?

    The foreign exchange and cryptocurrency markets are always active, and this past week was no exception. Stay ahead with a selection of essential stories and updates that matter most to market participants.

    Digital Assets

    Bitcoin breaks all records with a massive $1.347 billion transaction

    This transaction has surpassed previous records, setting a new benchmark for Bitcoin trades. Before this event, the largest Bitcoin transactions included a $1.1 billion trade in April 2020 involving 161,500 BTC, and other significant transactions ranging from $491 million to $1.033 billion throughout 2019 and 2020.

    Digital Assets

    Uniswap debuts Ethereum ‘uni.eth’ subdomains

    Decentralized exchange platform Uniswap has integrated Ethereum Name Service (ENS), allowing users to create human-readable domain names and cryptocurrency wallet addresses using .eth endings.


    Magic Square Expands with TruePNL Acquisition

    Binance’s web3 app store, Magic Square, acquired token platform TruePNL in a cash deal this week for an undisclosed sum. The deal brings TruePNL’s infrastructure (excluding branding & token) under Magic Square’s wing. Initially seeking a partnership, Magic Square opted for a full acquisition.

    Crypto Insider

    The Future of Prediction Markets? Zeitgeist Launches Decentralized Court System

    Polkadot-powered prediction market protocol Zeitgeist has announced the launch of its latest innovation: a decentralized court system.

    Digital Assets

    Crypto exchange Kraken fires back at SEC lawsuit, claiming overreach

    Crypto exchange Kraken is pushing back against the U.S. Securities and Exchange Commission (SEC), seeking to toss out a lawsuit that accused the platform of operating without proper registration.

    Industry News

    Exness Named a Best Place to Work in 2024

     Global leader Exness, tops in retail trading volume, earns 2024 “Best Place to Work” award, cementing its employee-centric culture after three prior years of winning the Cyprus national title.

    Digital Assets

    Swan Bitcoin taps Bakkt for crypto offering in the US

    “We are thrilled to be taking this exciting step forward in our partnership with Swan. This is just the beginning of our collaboration, as we intend to explore further growth opportunities together in the future, including expansion into international markets.”

    Digital Assets

    Polkadot Awards Bifrost a 500,000 DOT Loan to Enhance Liquid Staking Adoption

    Bifrost, a leader in liquid staking solutions, has secured a 500,000 DOT loan from Polkadot’s treasury to expand the reach and utility of its vDOT product within the ecosystem.