Consumer Sentiment Down the Drain: More Pain Ahead Likely

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.