U.S. consumer sentiment slides in October on government shutdown

NEW YORK Fri Oct 25, 2013 10:25am EDT

A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo. REUTERS/Jim Young/Files

A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo.

Credit: Reuters/Jim Young/Files

Related Topics

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."

(Reporting by Luciana Lopez; Editing by Meredith Mazzilli and Chizu Nomiyama)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
SanPa wrote:
The Tea Party is a worry. Many similarities between the times of today, and the arguments presented by antebellum southern states v.v. less central government involvement in issues seen as state’s choices.

Oct 25, 2013 10:48am EDT  --  Report as abuse
Go Figure, the childish behavior of the GOP undermines confidence. Not one person predicted this. /end sarcasm

Oct 25, 2013 10:51am EDT  --  Report as abuse
brotherkenny4 wrote:
The “US consumer” could change the world if they could just stop accepting their roll as a consumer. Their is no such thing as a group of consumers. This is like another manipulation techniques used by media and other control organizations for convincing people of what they think. I speak of the use of generation definitions such as “boomers” and “GenX”, or “millenials”. These ar all BS, and so is the term “consumer”. They tell you you are in these groups and then they convince you of what your typical concern is. How simple and ridiculous. Hey “consumers” you want jobs and lower prices. Stop consuming what the television tells you. Stop and tell the businesses they don’t get your money until they start acting like responsible americans. Lower the gasoline prices by decreasing demand. But no, you won’t do that because your a bunch brainwashed permanent children.

Yes I know, the people we’re discusiing here don’t read anything, I just had to say it anyway. Have a nice day!

Oct 25, 2013 11:40am EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.