Consumer sentiment sours as government shutdown threatens economic damage
Consumer sentiment soured in October as a government shutdown threatens to weaken a wobbly economy beset by an uptick in inflation and a sharp slowdown of hiring, fresh data on Friday showed. The reading marked a decrease from the previous month but it came in higher than economists expected.
Shopper attitudes have worsened for three consecutive months, resuming a decline that took hold after President Donald Trump took office, University of Michigan Survey data showed.
At its low point this year, consumer sentiment fell close to its worst level since an acute bout of inflation three years ago. The measure remains well below where it stood in December, before Trump took office.
Year-ahead inflation expectations ticked down from 4.7% in September to 4.6% in October, the data showed. The outcome anticipated by respondents would put inflation well above its current level of 2.9%. Long-run inflation expectations held steady from the previous month, data showed.
The data on consumer sentiment is likely to garner more attention than usual, since the government shutdown has halted closely watched releases from the federal government, including monthly jobs and inflation reports.
Consumer spending, which accounts for about two-thirds of U.S. economic activity, is a key bellwether for the outlook of the nation's economy.
A government shutdown typically risks only modest damage for the economy but it can cause a marked decline in consumer sentiment, threatening a later drop in consumer spending, some experts previously told ABC News.
Consumer sentiment fell more than 7 points from December 2018 to January 2019, coinciding with the most recent 35-day government shutdown, according to a Committee for Responsible Federal Budget analysis of University of Michigan survey data. A souring of consumer sentiment, albeit limited, occurred over each of the three most recent shutdowns that preceded 2018.
The government shutdown, which entered its 10th day on Friday, has shown little sign of resolution. The Senate has rejected dueling funding proposals from Democrats and Republicans in seven separate votes.
The shutdown has coincided with a delicate moment for the nation's economy, as a hiring slowdown stokes recession fears and inflation proves difficult to fully contain.
Federal Reserve Chair Jerome Powell said last month that policymakers face a "challenging situation" while they attempt to navigate the economy through a "turbulent period."
