Consumer Confidence ‘Collapses’ as Delta Variant Cases Rise

Consumer confidence is down, but the stock market continues to hum along, as Covid-19 cases rise because of the Delta variant. That all means it could be a challenging environment for charities and fundraisers seeking support from average donor households.

The following indicators, which experts say are important to nonprofits, have shown notable developments since our previous economic update.

Consumer Confidence

Delta variant surge dampens early summer optimism.

The late-summer surge of Covid-19 cases has put a noticeable damper on consumer confidence, according to the University of Michigan’s Surveys of Consumers. The consumer sentiment index fell 13.4 percentage points in August to 70.3 out of a maximum 100 points. That’s a big drop, exceeded only six other times in the surveys’ nearly 70 year history.

“There is little doubt that the pandemic’s resurgence due to the Delta variant has been met with a mixture of reason and emotion,” wrote economist Richard Curtin, who leads the Surveys of Consumers. “Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end.”

The “collapse” of consumer confidence does not mean an economic downturn is imminent, Curtin emphasized. Rather, the early summer optimism, now dashed by the reality of yet another surge, could have “an emotional impact on spending patterns” similar to that experienced in the wake of the September 11, 2001, terrorist attacks or after Hurricane Katrina. In this environment of economic pessimism, don’t be surprised if some households are less willing or able to make their regular donation.

Employment

Unemployment declines, but many are set to lose jobless benefits after Labor Day.

August saw a relatively large, half-percentage point decline in the unemployment rate, falling from 5.9 percent in June to 5.4 percent in July. The rate had hovered very close to 6 percent since the start of the year, so a half-point drop is notable.

Further, new applications for unemployment benefits were at some of their lowest levels since March 2020 but ticked up by 4,000 in the third week of August, increasing to 353,000.

Worth considering on the employment front, particularly for charities that serve the jobless: An estimated 7.5 million Americans will lose unemployment benefits after Labor Day, when the Pandemic Unemployment Assistance program ends. The expiration affects workers such as independent contractors who don’t qualify for typical unemployment programs but were without work due to the pandemic.

Stock Market

Major indices grew 1 to 2.8 percent.

Stock-market performance is one of the leading indicators of philanthropic activity, at least at a macro level.

As of the last week of August, most major stock-market indices had performed well over the previous 30 days. The Nasdaq Composite Index was up 2.8 percent, the S&P 500 was up 2.2 percent ,and the Dow Industrial Index was up just 1 percent.