News

Consumer confidence slides after government shutdown

Consumer confidence slides after government shutdown

CONSUMER CONFIDENCE: Consumer sentiment has dropped to its lowest level this year. Photo: Reuters

NEW YORK (Reuters) – U.S. consumer sentiment dropped in October to its lowest level since the end of last year as consumers worried congressional dysfunction and the resulting partial shutdown of the federal government would hurt growth, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment fell to 73.2 in October from 77.5 in September and was the lowest final reading since December 2012.

The October figure was lower than both the 75.0 forecast by economists in a Reuters poll and the mid-month preliminary reading of 75.2.

“Not too pretty but not a disaster after all,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York. Fiscal fights in Congress “took their toll,” with a drumbeat of negative news eroding sentiment.

The federal government shut down for 16 days in the first half of October as Republicans in Congress sought to undermine President Barack Obama’s signature health care law as a condition of funding the government.

The government also came close to breaching its borrowing limit, which compounded the crisis and could have pushed the country closer to a historic debt default.

While a last-minute agreement averted that outcome by raising the debt ceiling until early next year, rating agency Fitch warned it could still cut the U.S. sovereign credit rating because of the political brinkmanship.

“When asked to describe in their own words what they had heard about recent economic developments, the number of consumers that negatively mentioned the federal government in October was the highest in the more than half-century history of the surveys,” survey director Richard Curtin said in a statement.

Other gauges also hit multi-month lows. The index of consumer expectations, at 62.5, hit its lowest since November 2011, and the index of current conditions, at 89.9, hit its lowest since April.

The debt impasse likely affected economic growth in the quarter, with Standard & Poor’s estimating the shutdown took $24 billion out of the world’s biggest economy.

The one-year inflation expectation fell to 3.0 percent from 3.3 percent while the five-to-10-year inflation outlook edged down to 2.8 percent from 3.0 percent.

The sliding consumer confidence could in turn affect holiday spending – especially as the Congressional deal is only a temporary fix, which could see renewed fiscal debates toward year-end.

“I really hope the holiday season will be okay,” Shulyatyeva said. “This is really bad timing.”

Recent Headlines

in Local

Snuff the Butt at UI Tailgate Parties

cigarette butt

Enforcement still up in the air

in Local

Decatur Asian Carp Screen Back in Place

Lake Decatur

Bad winter weather damaged screen

in Local

Medical Marijuana Applications Posted for Business

marijuana

Applications for medical marijuana begins September 2 for patients, September 8 for dispensaries.

in Local

Illinois Museum to Display 1916 Military Equipment

ihpa logo

Military equipment from 1916 to be on display starting September 6.

in Local

Reaction to IDNR’s Long-Awaited Fracking Rules Proposal

frack

One expert laments the length of time it took DNR to write the rules, which he says are too restrictive. Meanwhile, another expert says she'll have to see what the rules are before she calls them restrictive.