WASHINGTON - 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, N.Y., 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.”
Projections of the 68 economists surveyed by Bloomberg ranged from 65 to 80. The index averaged 89 in the five years leading up to the economic slump that began in December 2007, and 64.2 during the 18-month recession that ensued.
Stocks rose for a third day as lawmakers continued talks to raise the government’s debt limit to avoid a default. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,695.23 at 10:30 a.m. in New York. It has gained 18.7 percent this year through yesterday, shoring up the personal finances of equity investors.
A report from the Labor Department yesterday showed jobless claims rose last week to the highest level in six months. Applications for unemployment benefits jumped by 66,000 in the period ended Oct. 5 to 374,000, the report said.