U.S. consumer sentiment dropped in October to its lowest level since the end of last year as consumers worried congressional dysfunction and the resulting partial shutdown of the federal government would hurt growth, a survey released on Friday (Oct. 25) showed.
The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment fell to 73.2 in October from 77.5 in September and was the lowest final reading since December 2012.
Reuters reported that the October figure was lower than both the 75.0 forecast by economists in a Reuters poll and the mid-month preliminary reading of 75.2.
“Not too pretty but not a disaster after all,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York. Fiscal fights in Congress “took their toll,” with a drumbeat of negative news eroding sentiment.
The federal government shut down for 16 days in the first half of October as Republicans in Congress sought to undermine President Barack Obama’s signature health care law as a condition of funding the government.
The government also came close to breaching its borrowing limit, which compounded the crisis and could have pushed the country closer to a historic debt default.
While a last-minute agreement averted that outcome by raising the debt ceiling until early next year, rating agency Fitch warned it could still cut the U.S. sovereign credit rating because of the political brinkmanship.
“When asked to describe in their own words what they had heard about recent economic developments, the number of consumers that negatively mentioned the federal government in October was the highest in the more than half-century history of the surveys,” survey director Richard Curtin said in a statement.
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