Consumer confidence plunged to a record low in Los Angeles during the first quarter as the region began to feel the impact of Covid-19, according to a survey released April 7.
The survey from the Lowe Institute of Political Economy at Claremont McKenna College showed the consumer sentiment index for business conditions in Los Angeles County at 65.8, down nearly 24 percentage points from the 89.4 registered for the fourth quarter. For the first quarter of 2019, the index reading was at 85.
The drop would have been even more severe were it not for the fact that most responses were collected in early and mid-March, just before the March 19 business shutdown orders from Gov. Gavin Newsom and Los Angeles Mayor Eric Garcetti.
Social distancing-related bans on mass gatherings were implemented in late March as coronavirus cases began to soar in the county.
Only a fraction of the responses came after March 19, according to survey principal author Cameron Shelton, director of the Lowe Institute of Political Economy and associate professor of political economy at Claremont McKenna College in Claremont.
A more complete gauge of the impact of those shutdown orders came from the Lowe Institute’s statewide survey, which was able to segregate out responses that came after March 19. Based on those replies, the statewide index plummeted to a record low 51.5, nearly 45 percentage points below the fourth quarter reading of 96.9.
“An index at this level is typically seen in the depths of a bad recession, such as the 2008 financial crisis,” Shelton said. “But it usually takes six to nine months from the onset of the recession for sentiment to deteriorate this far. Having such a rapid drop in just over two weeks is new territory.
“In early March when the field survey began, respondents were concerned but cautiously optimistic. As events unfolded, we were able to track on a daily basis a marked drop culminating in a precipitous decline in the last week of our study,” Shelton added.
For the L.A. County business conditions survey, Shelton said the drop in confidence was most pronounced among respondents with higher education levels who tended to be large consumers of news and information. “The higher a respondent’s level of education, the greater the drop in sentiment,” Shelton said.
The index for consumer sentiment on the local economy is the first of its kind for Los Angeles. It is produced through an alliance between the Lowe Institute and Chapman University in Orange. A baseline index reading of 100 was set in the second quarter of 2015 for the index, which debuted in 2017.
The first quarter reading was from a sampling throughout most of March of roughly 500 Los Angeles County residents who answered questions about their current economic situation, their outlook for their own finances and spending in coming quarters, and their outlooks on both the local and national economies.
Healthcare/biomed, energy, engineering/construction and infrastructure reporter Howard Fine can be reached at [email protected]. Follow him on Twitter @howardafine.
