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Report: Political Bickering Dents Jan. Sentiment

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January 18, 2013 by   Leave a Comment

Consumer confidence in the U.S. unexpectedly fell in January to a one-year low as higher payroll taxes began to take hold.

Bloomberg reported that the Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped to 71.3, the lowest since December 2011, from 72.9 the prior month. The gauge was projected to rise to 75, according to the median forecast of 74 economists surveyed by Bloomberg News.

Debate in Washington over spending and the debt ceiling, and an increase in payroll taxes used to fund Social Security are hurdles for a pickup spending, as discounters such as Target Corp. try to attract shoppers with year-round price matching. At the same time, job gains, rising home values and cheaper fuel may help sustain retail sales.

“Households are getting a little bit jaded with the ongoing political stalemate,” said Paul Dales, a senior economist at Capital Economics Ltd. in London, who projected a reading of 70. People are also seeing that their “after-tax income has fallen a little bit. On the face of it, any fall in confidence might suggest that spending might be slower.”

Estimates for the confidence measure ranged from 70 to 84, according to the Bloomberg survey. The index averaged 64.2 during the last recession and 89 in the five years before the economic slump that began in December 2007 and ended in June 2009.

The figures are in line with Bloomberg’s Consumer Comfort Index, which dropped last week to a three-month low, reflecting a fourth straight decline in the buying-climate gauge.

The Michigan index of expectations six months from now, which more closely projects the direction of consumer spending, dropped to 62.7, the lowest since November 2011, from 63.8 the prior month.

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