Tags: consumer | confidence | economics | shutdown

Gallup: Confidence in the Economy Plummets

By Michael Kling   |   Wednesday, 06 Nov 2013 01:07 PM

The public's confidence in the economy in October registered the largest drop since Gallup began tracking it in 2008.

Gallup's Economic Confidence Index dropped 16 points to minus-35 during the month of the government shutdown and political deadlock.

Confidence improved after Congress reached an agreement to end the shutdown, but has yet to recover to pre-shutdown levels, according to Gallup.

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Confidence in the economy for the entire month of October was the lowest since December 2011 when it was minus-38 after the nation's credit rating was downgraded.
Confidence began sliding in mid-September as the political battle was getting underway, then fell to minus-34 the first week of October when the shutdown began.

Confidence slowly improved after the shutdown ended on Oct. 17, reaching minus-29 for the week ending Nov. 3, but was still lower than mid-September levels.

The index is based on both Americans' assessments of current economic conditions and their perceptions of the economy's future. Both components soured last month, but views about the economy's future worsened more than twice as much as perceptions of the current economy.

In October, 68 percent of Americans said the economy is getting worse, the highest such percentage in nearly two years, while 28 percent said it is getting better. On the other hand, 15 percent said the economy is in excellent or good shape and 44 percent said it is poor.

"It is clear that partisan gridlock during the fiscal debates negatively affected Americans' economic views, regardless of their political leaning or socioeconomic status," wrote Gallup's Alyssa Brown.

The drop in confidence did not appear to affect consumer spending, as Americans' self-reported spending increased slightly during October, indicating the confidence drop was due to politics rather than economics, Gallup says.

The Conference Board Consumer Confidence Index also reflected a sharp drop in confidence in October. Its index fell from 80.2 in September to 71.2.

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Those expecting business conditions to improve over the next six months fell from 20.6 percent to 16 percent.

"Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers’ expectations," said Lynn Franco, director of economic indicators at The Conference Board.

While confidence dropped during previous political stalemates, confidence will probably remain volatile over the next several months since the agreement reached funds the government only into early next year.

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