U.S. Economic Confidence Slides Amid Coronavirus Situation

WASHINGTON, D.C. -- Americans' economic confidence, which last month reached its highest point in almost 20 years, has been shaken in the midst of the novel coronavirus threat. The COVID-19 pandemic fueled major stock market losses in recent weeks, and Gallup's Economic Confidence Index fell from +41 in February to +22 in March.

U.S. economic confidence is likely even lower now than what the March 2-13 poll suggests, given that economic evaluations were significantly worse during the second week of interviewing than the first. But the weekly internal results suggest economic confidence was already declining before the rapid spread of the virus in the U.S. the week of March 9, which prompted the cancellation of most large events and the eventual closure of schools in many states.

This week, the government urged restaurants and other public gathering spots to close. Stocks suffered their biggest one-day loss in history on Monday.

Gallup has measured economic confidence since 1996, including monthly measures since 2001. The 19-point drop in economic confidence from February to March is one of the largest that Gallup has measured from one month to the next since monthly measurement began. The only larger one-month declines were a 27-point drop between January and February 2001, just before the start of the 2001 recession, and a 22-point decline between June and July 2002. Both of those drops came during a period of decline for most internet-based company stocks.

Increased Pessimism About Economy's Direction Responsible for Most of Decline in Confidence

The Economic Confidence Index is based on responses to two measures -- Americans' evaluations of current economic conditions and their perceptions of whether the U.S. economy is getting better or worse. The index has a theoretical maximum of +100 and a theoretical minimum of -100. The current +22 index score indicates Americans remain more positive than negative about the economy.

Americans continue to evaluate current economic conditions positively, with 54% describing them as "excellent" or "good" and 11% as "poor." In February, 63% of Americans rated economic conditions as either excellent or good.

Most of the decline in economic confidence since February comes from Americans' greater pessimism about the trajectory of the economy. In February, Americans were nearly twice as likely to say the economy was getting better (61%) than to say it was getting worse (33%).

By contrast, the March survey finds 47% of Americans saying the economy is getting better and 47% saying it is getting worse. The even split obscures the fact that Americans were more optimistic than pessimistic about the economy's course during the first week of March, but more pessimistic than optimistic the second week.

Confidence Down Among All Party Groups

Economic confidence is strongly influenced by partisanship, with supporters of the president's political party tending to be much more upbeat about the economy than supporters of the opposing party. The March Economic Confidence Index scores are +77 among Republicans, +12 among independents and -21 among Democrats.

Declines among all party groups were evident in March, but confidence fell more among Democrats and independents than among Republicans.

	February 2020	March 2020	Change
Republicans	88	77	-11
Independents	31	12	-19
Democrats	-1	-21	-20
Gallup's Economic Confidence Index combines respondents' assessments of current economic conditions and whether the economy is getting better or worse. It has a theoretical range of -100 to +100.
Gallup

Implications

The vast majority of Americans expect COVID-19 to have a negative effect on the world economy, according to the same March Gallup poll. With the virus spreading widely in the U.S., the damage it could do to the U.S. economy is becoming increasingly apparent. Although Americans continue to rate economic conditions positively, they are somewhat less likely to do so, and are increasingly skeptical that the economy is improving. These changes in attitudes have led to one of the largest month-to-month drops in economic confidence in the past two decades.

Americans' economic confidence may deteriorate further as COVID-19 continues to take a toll on the economy, particularly the stock market. The Trump administration and Federal Reserve Board have taken, or are considering taking, strong action to try to limit the damage the novel coronavirus does to the U.S. economy. While some of these actions or proposals have led to stock market rallies, others appear to have done more to make investors anxious rather than calm, causing stock values to nosedive and remain well below their peaks earlier this year.

The timing of the decline in economic confidence is problematic for Trump's reelection bid -- but if the U.S. successfully navigates the COVID-19 threat and economic confidence is restored, he may be in a strong position to win a second term.

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