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The numbers: After a two-month freefall, U.S. consumer sentiment improved slightly in early May as some states began to reopen their economies and the spread of the coronavirus slowed, a closely followed survey showed.
The preliminary reading of the consumer-sentiment survey in May edged up to 73.7 from 71.8 in April, the University of Michigan said Friday. Economists had forecast a small decline.
Americans were less confident about their own finances, but a massive infusion of federal aid in the form of stimulus checks, extra unemployment benefits, and contributions to the salaries paid by small businesses helped lift their spirits.
Read: 39 million Americans have applied for jobless benefits. How many are getting them?
What happened: Even in the face of the worst economic crisis in almost a century, consumer sentiment is still hovering well above its record low of 55.3 in 2008.
Federal aid, low interest rates, and widespread price discounting of consumer goods have made it easier for households to weather the storm early on, though it’s unclear how long that will last.
A portion of the sentiment survey that examines how Americans view the present rose to 83 points from 74.3. Yet another part of the survey that gauges attitudes for the next six months slipped again to 67.7 from 70.1.
Consumers were still more worried about the threat to their health from COVID-19 than the pandemic’s damage to their financial well-being.
Some 61% said the threat to their health was their biggest worry while those who pointed to their finances as their No. 1 concern slipped to 17% from 21%.
Yet 21% said their biggest worry is the “social isolation” that’s resulted from the stay-at-home orders and government-ordered shutdowns. That’s up from 17% in the prior month.
“While these shifts were quite small, they indicate the growing costs of social isolation and its potential to shift opinions about reopening the economy,’ said Richard Curtin, the chief economist of the sentiment survey.
Once again, there was a large split based on party and ideological identification.
“Republicans are relatively positive, although a good deal less than recently, and Democrats are gloomy, while political independents are broadly in the middle and more indicative of the overall result,’ said Joshua Shapiro, chief economist of MFR Inc.
Big picture: The battered U.S. economy has sunk into recession as most activity came to a screeching halt in April. Sales at retailers nationwide, for example, sank a record 16% last month.
Consumers appear more hopeful that the economy will start to recover soon, but economists warn it could take years for the U.S. to get back to normal absent a vaccine for the virus. The idea of a long recovery is slowly sinking in with the public too. The survey showed that consumers think the economy could struggle for years to recover all the lost ground.
Read: Why the economy’s recovery from the coronavirus is likely to be long and painful
What they are saying?: “We think the improvement in sentiment is fragile. Whether it can be sustained will depend in part on whether the government enacts further stimulus measures to help households and whether the relaxation of restrictions results in a resurgence in COVID-19 infections,” economists Gregory Daco and Nancy Vanden Houten wrote in a note to clients.
Market reaction: The Dow Jones Industrial Average DJIA, -0.87% and S&P 500 SPX, -0.90% fell slightly in early Friday trades.
