Consumer Sentiment Down the Drain: More Pain Ahead Likely

October 11, 2013 by Paul Ausick

100267991The Thomson Reuters/University of Michigan preliminary consumer sentiment index for October dropped to 75.2 from a final reading of 77.5 in August. The October index is the lowest reading since January. Economists were expecting a reading of 76. The July reading of 85.1 marked a six-year high in the index.

The only good news of the day is that federal government data on producer prices and retail sales were not released due to the government shutdown.

This marks the third consecutive drop in the consumer sentiment index, and the surprising thing is that it did not fall further. The survey’s director said, “The muted response may be due to consumers giving progressively less credence to the economic scare tactics that have framed the debates over the past few years.”

The current conditions index rose slightly from 92.6 at the end of September to 92.8. Economists were expecting a reading of 91.0.

The expectations index fell from 67.8 in September to 63.9, the lowest reading so far this year. The estimate called for a reading of 67.5.

The loss of consumer confidence in the U.S. economy may be a more important consequence of the federal government shutdown than the actual dollar losses. If the shutdown ends soon and the government manages to avoid defaulting on the federal debt, consumers’ short memories are likely to put all these negative thoughts in the rear-view mirror as we head toward the holiday season.

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