Economic Sentiment Posts An Optimistic Start To 2021
As Americans say goodbye to the difficult year that was 2020 and ring in the New Year, consumers are expressing heightened confidence in 2021’s first reading of the HPS-CivicScience Economic Sentiment Index (ESI). Economic sentiment continued its month-long upward trend, posting an increase (1.4 points to 48.3) for the third straight reading following the enactment of a second COVID-19 relief bill and continued deployment of a COVID vaccine.
Four of the five individual indicators rose during the two-week reading period. The largest increase was in confidence in the job market, which rose 2.7 points to 41.1. Confidence in the labor market has now risen 6.3 points over the past month, despite November’s stagnant jobs report and persistently high weekly unemployment claims. The consumer-centric indicators also received steady bumps, as confidence in making a major purchase and personal finances rose 2.5 and 1.7 points, respectively. Confidence in the overall U.S. economy followed last reading’s substantial increase with a muted, 0.4-point jump, entering 2021 at 50.7. 2020’s hottest indicator, the housing market, was the sole indicator to decline, falling by 0.3 points to 49.0.
The reading’s increase moves the ESI to confidence levels not seen since October and follows on the heels of the enactment of a $900B COVID-19 relief bill. The U.S. continued its vaccine rollout over the holidays, but two issues may impact future readings. Vaccine deployment delays across the country have stoked concerns about a slower pace of vaccination that could prolong the impact of the pandemic. Those concerns were exacerbated by the news that December was the deadliest month of the pandemic, as over 77,000 people lost their lives in the U.S. and experts remain worried that January may also be difficult following a holiday surge and the potential spread of a more contagious COVID-19 variant.
The ESI’s three-day moving average fluctuated heavily over the past two weeks, beginning at 48.0 before dropping to its reading low of 46.4 on December 26. The moving average then steadily increased, peaking at 51.7 on January 2 before falling significantly to close the reading at 46.9.
The next release of the ESI will be on Wednesday, January 20, 2021.