Consumer Sentiment Slides on Government Shutdown

Government Shutdown
Bill Clark/CQ Roll Call via Getty ImagesFederal workers hold up signs at the Capitol on Oct. 16, urging Congress to end the government shutdown.
By Luciana Lopez

NEW YORK -- 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 federal government shutdown would hurt growth, a survey released 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 congressional Republicans 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 multimonth 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 congressional impasse likely affected 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.


Increase your money and finance knowledge from home

Introduction to Economic Indicators

Measure the performance of the economy.

View Course »

Socially Responsible Investing

Invest in companies with a conscience.

View Course »

Add a Comment

*0 / 3000 Character Maximum

Comments

Filter by:
willypfistergash

And this shlt is gonna happen all over again in a couple months. Reid is already on record saying he wants roll back of the sequester, more spending and tax increases.

October 25 2013 at 11:06 AM Report abuse +3 rate up rate down Reply
willypfistergash

The shutdown went through two weekends and a paid holiday. Didn't it really only go 11 days?

October 25 2013 at 11:02 AM Report abuse +1 rate up rate down Reply