Surrounded by a sluggish economy and dysfunctional government, consumer sentiment dropped to its lowest level of the year. According to Thomson Reuters/University of Michigan’s final reading, consumer sentiment fell to 73.2 in October, compared to a preliminary reading of 75.2 and September’s final reading of 77.5. It was the worst reading since December 2012.
During the last recession, the index averaged slightly above 64. In the five years before the financial crisis, it averaged almost 90. Consumer sentiment is one of the most popular measures of how Americans rate financial conditions and attitudes about the economy. The University of Michigan’s Consumer Survey Center questions 500 households each month for the index.
The results were worse than expected. On average, economists expected a final reading of about 75 for October. The consumer sentiment index has missed expectations for two consecutive months, and has declined for three months in a row.
At the beginning of October, the U.S. Government went into partial shutdown mode for the 18th time in the past four decades, affecting everything from national parks to numerous agencies and public services. Adding to the political debacle, Congress bickered over raising the national debt ceiling soon for the 80th time since 1960. Republicans and Democrats finally agreed to a short-term fix by funding the government until January 15, and suspending the debt limit until February 7. However, the damage was already done.
The reading on current and future conditions both declined. Current economic conditions, which measure whether Americans think it is a good time to make large investments, fell from 92.6 in September to 89.9 in October, its lowest level since April. Consumer expectations dropped to 62.5, its lowest level since November 2011.
“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,” said survey director Richard Curtin.
Earlier this month, a national poll found that Congress has a favorability rating in the single digits. According to Public Policy Polling, only 8 percent of American voters approve of the job Congress is doing, compared to 86 percent who disapprove. The feeling is mutual across party lines. Democrats, Republicans, and Independents only gave Congress approval ratings of 7 percent, 10 percent, and 8 percent, respectively.
Compared to other parts of government, Congress is clearly out of favor. When asked to choose between Congress or the IRS, 42 percent of Americans had a higher opinion of the taxman, compared to 33 percent for Congress. Twenty-four percent were not sure. Choosing between Congress and the DMV, 58 percent of respondents favored the DMV, compared to only 24 percent for Congress. In fact, 73 percent of Americans found jury duty more favorable than Congress.
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