Consumer sentiment in the U.S. fell in October to a nine-month low as the government's partial shutdown and the debt-ceiling debate caused outlooks to sour.
The Thomson Reuters/University of Michigan preliminary consumer sentiment index of decreased to 75.2 this month from 77.5 in September. Economists in a Bloomberg survey projected a drop to 75.3, according to the median estimate.
Households are becoming pessimistic about the economy as the shutdown heads into a third week and the deadline looms for raising the debt limit and avoiding a default. Nonetheless, rising wealth, lower gasoline prices and a resilient job market are preventing confidence from slipping even more, indicating the economy can bounce back once lawmakers reach a compromise.
"Confidence is down a bit given the shenanigans in Washington," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, and the top-ranked sentiment forecaster over the past two years, according to data compiled by Bloomberg. "The labor market has been improving, and hopefully this degree of turmoil in Washington is just temporary."
David Fuller's view This political event has been a lose-lose situation in terms of the USA's reputation for governance. Moreover, people are angry, not least leaders in countries that regard themselves as allies and trade partners of the US. In a soft global economic environment, they have seen US political dysfunction as threat to their near-term economic recovery prospects.
It was not a big threat, but it had the potential to become more serious, and it has shaved a little off global GDP growth forecasts. And what was the purpose? Even though we too often blame others for our difficulties, it looked and was excessively introspective, dysfunctional and self-indulgent.
Global investors in equities have reason to be less concerned as they have actually benefited in the short term. As short sellers scrambled to cover, a small reaction for most stock markets was quickly reversed. Yes, corporate profits are generally soft but they are often flattered by share buybacks.
Importantly, most of the big, powerful corporate Autonomies that Fullermoney favours are much healthier than most economies. They have become more disciplined in recent years, reducing debts while these have increased for most countries. Autonomies have shed expensive labour but countries have to support too many unemployed people. Autonomies are also the main beneficiaries of this era of visibly accelerating