Consumer sentiment in California declined 22.4% in the second quarter, as the global pandemic kept most businesses closed for the bulk of the period between late March and mid-June, according to an index released Monday by economists at Claremont McKenna College and Chapman University.
The Chapman-CMC California Consumer Sentiment Index went from 82.6 in late March 2020 to 64.1 in late June. That sharp drop follows a 14.7% decline in the first quarter, making for a 33.8% decline in the index since the onset of COVID-19, according to the Gary Anderson Center for Economic Research at Chapman University and CMC’s Lowe Institute of Political Economy.
“The decrease in sentiment since the onset of COVID-19 is broadly felt, with steep declines in every demographic group as California navigated a state-wide stay-at-home directive and shutdown of most businesses,” said Cameron Shelton, director of the Lowe Institute and an associate professor of political economy at CMC.
“While this decline is across all demographics, there are a few groups that stand out as somewhat harder hit and a few groups that have endured less of a decline,” Shelton said. “For example, those at the upper end of the income scale have greater job security and more resources to cope with the effects of the shutdown.”
Sentiment among respondents earning more than $150,000 per year is down 21.9% this year, compared with 33.6% for the rest. One group that has been particularly hard-hit over this period is the self-employed, with confidence plummeting 43.2%.
“Only at the highest level of income and resources do we begin to see a systematically smaller effect of the crisis,” Shelton said.
Despite the higher mortality rate from COVID-19 among older Americans, the youngest age groups experienced the greatest collapse in confidence, the index showed. Consumer sentiment among those aged 18-24 declined 37.1%, while sentiment among those 65 and older declined 29.2%.
There were few differences among those between the ages of 24 and 64.
“The youngest group is far more likely to have been laid off or furloughed as a result of the shutdown,” Shelton said.
Despite the racially charged social unrest ongoing during the June 3-19 survey period, sentiment declined similarly among Black and white Californians. And despite the fears of COVID-19-stoked racial animus against Chinese Americans and other Asian Americans, sentiment among that group was the most robust of any racial group, declining 24.6%.
The greatest decline in sentiment from any ethnic group in the first half of the year — 34.8% — was among Latino respondents.
“Latino consumer sentiment may have the largest decline of any major ethnic group because Latinos often have large extended families that meet regularly,” said Chapman University professor Marc Weidenmier. “The stay-at-home orders have eliminated this possibility and highlighted some of the social problems created by the quarantine.”
While evaluations of the present have deteriorated to record lows, expectations for conditions a year from now are less affected, the economists said. Respondents’ sentiment regarding current business conditions in California and the nation declined a staggering 63% since the fourth quarter of last year. when asked about business conditions a year from now, responses were down 23%.
Least affected by COVID-19 is consumer sentiment regarding the purchase of big-ticket items. Sentiment regarding whether it is a good time to purchase an automobile has declined a comparatively mild 13.8% since the fourth quarter of 2019.
“The difference shows that respondents expect a recovery over the next year. But the 23% decline in expectations about the future shows most respondents believe there will still be lingering weakness even a year from now,” Weidenmier said.
The Index is constructed from the results of a quarterly survey of a random sample of 2,000 people stratified on the basis of age, gender, ethnicity, income and zip code. The survey asks respondents seven questions concerning their current situation, perceived future prospects and spending plans.
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