- Consumer confidence spiked 5 days after the signing of the American Rescue Plan.
- According to Morning Consult, it was the largest increase in confidence of any stimulus package.
- In particular, lower-income Americans saw their confidence grow, bucking a prior trend.
- See more stories on Insider’s business page.
The $1.9 trillion stimulus signed into law by President Joe Biden boosted consumer confidence more quickly than the two major relief packages signed by former President Donald Trump, according to a new report from Morning Consult.
Five days after the $1.9 trillion American Rescue Plan was signed, Morning Consult’s Index of Consumer Sentiment (ICS) rose by 2.7%, a much larger increase than the 0.1% boost after the CARES Act and the 0.7% increase following the December 2020 package.
The report attributes the rapid rise in consumer confidence to the size and speed of relief that Americans saw. The $1,400 stimulus checks in the package were the largest direct cash infusions Americans have seen from a stimulus package. And people got them fast: By Wednesday, the Treasury Department had distributed 90 million direct payments, with more paper checks on their way.
The numbers also show that lower- and middle-income Americans saw their confidence skyrocket after the passage of the American Rescue Plan. In households that have annual incomes under $100,000, ICS rose by over 3% five days after the bill was signed; but for households with annual incomes over $100,000, ICS rose by just 1%.
The new stimulus could help bridge the K-shaped confidence gap
Throughout the pandemic, much speculation has centered on what shape the recovery would take. So far, it’s looked like a K: higher-income Americans have seen their careers and incomes grow, while lower-income Americans are experiencing the opposite.
That K has also taken shape in consumer confidence: A previous Morning Consult analysis found that lower-income Americans saw their confidence in the economy drop, and stay low. Meanwhile, higher-educated Americans saw a V shape for their confidence, as it rebounded and grew.
But the boost in confidence post-stimulus package – especially among lower-income Americans – also shows promising signs for repairing the K-shaped confidence recovery.
“The gap in the so-called K-shaped recovery will depend on getting lower income and less well-educated workers back to work,” John Leer, the report’s author, previously told Insider.
Broadly, the Morning Consult report anticipates that the confidence hike from the latest stimulus package will last through the summer, and that the overall boost will come to around 10%.