How Is Coronavirus Shaping Economic Expectations? A New Survey Offers Initial Results

These are still early days for understanding the coronavirus (COVID-19) that’s threatening our health and roiling the global economy, but the first draft of analysis is starting to roll in. Among the first reviews is a new working paper that assesses how COVID-19 is influencing macroeconomic expectations.

The crisis will reorder many facets of how the world thinks about markets and macro and quite a lot of the attitude adjustment will likely fall under the general topic of behavioral factors. As an initial inquiry into what will inevitably become a large and distinct body of research – file it under coronavirus blowback —  Carola Binder, assistant professor of economics at Haverford College, dips her analytical toes into the subject. The focus is modest but informative: surveying U.S. consumers and how their expectations on inflation and unemployment changed following the emergency interest rate cut by the Federal Reserve on March 3.

“Consumers are, in general, attentive to and concerned about the coronavirus,” she reports in “Coronavirus Fears and Macroeconomic Expectations.” The March 5-6, 2020 survey found that “28% have canceled or postponed travel and 40% purchased food or supplies in response to these concerns.”

These numbers have likely increased in the days since Binder conducted the survey—this writer, for example, recently visited a local supermarket and the shelves of many staples – pasta, canned goods, soap, etc. – were wiped clean.

She also reports that “greater concern about coronavirus is associated with higher inflation expectations and more pessimistic unemployment expectations.” The finding is “consistent with recent research showing that many consumers equate ‘bad times’ with ‘high inflation.’”

It’s also notable that 50% of respondents said they were following the news about the coronavirus “somewhat closely” and 43% “very closely.”

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