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Investors and consumers evidently have more faith the U.S. will rebound quickly from the coronavirus pandemic than the experts on the economy.
The Dow Jones Industrial Average DJIA, +0.40% has climbed 10% in the past month, reflecting optimism the economy will start to recover as states take the first tentative steps to reopen for business. Georgia was the first to go earlier this week and other states such as Texas. Ohio and Florida are moving in that direction.
The outlook of Americans, meanwhile, appears to have stabilized after the pandemic closed down most of the economy a month and a half ago and triggered a freefall in consumer confidence.
The two longest running surveys of consumer confidence compiled by the Conference Board and University of Michigan both experienced record declines in April, but they also showed that consumers think the economy will be significantly improved six months from now.
Most strikingly, the Conference Board’s index of future expectations actually improved to 93.8 in April from 86.8 in March.
Read:Consumer confidence suffers record drop, but Americans more hopeful of future
Another weekly survey by Morning Consult also suggests consumers are showing some cautious optimism that the nation might have turned the corner in its battle against the coronavirus.
Hopes for a rapid recovery confounded the economists who run the surveys.
“Consumers need to be prepared for a longer and deeper recession rather than the now discredited message that pent-up demand will spark a quick, robust, and sustained economic recovery,” Richard Curtin of the University of Michigan warned earlier in the month.
Read:Consumer sentiment stabilizes at end of April. Unrealistic hopes of quick recovery?
Yet if most consumers themselves actually resorted to pre-pandemic behavior in several months, the economy would stand a better chance of a more rapid rebound. Consumer spending accounts for roughly 70% of U.S. economic activity.
“There is hope about the future, that this situation is temporary and the world will get through it,” noted senior economist Jennifer Lee of BMO Capital Markets.
What’s more, the consumer confidence index is still well above its historic low of 25.3 in February 2009 during the Great Recession. Despite the record plunge in confidence in April, consumers don’t expect a deep coronavirus-induced recession to last that long.
Most economists — members of the famed “dismal science” — don’t seem to share the view of investors and consumers. They worry about another viral outbreak in the fall and think the U.S. and global economies will take several years or longer to recover given the deep damage caused by pandemic.
Read: Why the U.S. economy’s recovery from the coronavirus is likely to be long and painful
In the U.S., for instance, more than 26 million people have already lost their jobs to push the unemployment rate above 15%.
