As the American economy continues to recover from the effects of the coronavirus pandemic, US consumers are slowly starting to feel the impacts of the improving economy. In November 2020, the Reuters/University of Michigan consumer sentiment index showed that confidence had increased to its highest level since February. This positive outlook is being driven by several factors, including a steady stock market, declining unemployment, and low inflation.
The stock market has remained strong in recent months, even despite the pandemic-induced economic slowdown. The S&P 500 stock index has recovered in nearly full from its March 2020 lows and has gained more than 70 percent since then. This indicates that the markets expect a strong economic recovery in the near future.
The declining unemployment rate has also encouraged consumer sentiment. In November, unemployment fell to its lowest level since the pandemic started, with 6.7 percent of Americans out of work. This rate is still high compared to pre-pandemic levels, but the downward trend in unemployment shows that the economy is on the right track.
Finally, low inflation has also helped boost consumer confidence. Despite the massive increase in government debt due to coronavirus relief measures, inflation remains relatively low. Inflation in September 2020 was 1.4 percent, about the same as the year before. This speaks to the resilience of the American economy and gives consumers confidence that prices won’t rise significantly in the near future.
These three factors combined have contributed to an improved consumer sentiment in the US. Despite the still-present challenges of the pandemic, Americans are starting to feel better about the economy and their prospects for the future. This sentiment is likely to increase with every piece of positive news about the US economy, and it should bode well for economic growth in the coming months.
