Consumers’ expectations for economy plunge to two-year low

Americans in October were the most pessimistic about the nation’s economic prospects in almost two years as concern mounted that continued political gridlock will hurt the expansion. More

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Consumers’ expectations for economy plunge to two-year low

BLOOMBERG FILE PHOTO/VICTOR J. BLUE
AFTER A 16-DAY shutdown of the federal government -- the first in 17 years -- consumer confidence fell in October to its lowest level since November 2011, Bloomberg reported Thursday.
Posted 10/17/13

WASHINGTON - Americans in October were the most pessimistic about the nation’s economic prospects in almost two years as concern mounted that continued political gridlock will hurt the expansion.

The monthly Bloomberg Consumer Confidence Index expectations gauge plunged to minus 31, the lowest level since November 2011, from minus 9 in September, a report showed Thursday. The share of people projecting the economy will worsen jumped by the most since the collapse of Lehman Brothers Holdings Inc. five years ago. The weekly measure of current conditions fell to minus 34.1 in the period ended Oct. 13, the weakest since March.

The legislation passed by Congress last night to raise the debt ceiling and fund the government into 2014 may be setting the stage for another round of confrontations early next year. The fiscal impasse in Washington has spared few as today’s report showed consumers across almost all demographic groups grew increasingly distressed.

“The government shutdown has resulted in a startling decline in consumer sentiment and likely business sentiment that will result in a much slower pace of consumption and capital expenditures in the current quarter,” said Joseph Brusuelas, a senior economist for Bloomberg LP in New York. “Should lawmakers kick a decision into early 2014, it is likely that consumer sentiment will keep deteriorating.”

Claims elevated

Another report today showed more Americans than forecast filed applications for unemployment benefits last week as California continued to work through a backlog, indicating it will take time to gauge the impact of the federal shutdown. Jobless claims decreased by 15,000 to 358,000 in the week ended Oct. 12 from a revised 373,000 in the prior period, according to Labor Department figures.

Stocks fell, after the Standard & Poor’s 500 Index came within four points of a record, as investors assessed the effects of the budget standoff and International Business Machines Corp. and Goldman Sachs Group Inc. tumbled amid declining revenue. The S&P 500 declined 0.3 percent to 1,716.2 at 9:40 a.m. in New York.

The monthly expectations gauge showed 47 percent of respondents said the economy was going to get worse, up 13 points from September. That was the biggest surge since October 2008, the month after Lehman Brothers was brought down by the financial meltdown as the housing bubble burst. Back then, the negative reading surged by 30 points to 82 percent.

The weekly Bloomberg comfort measure dropped 4.4 points from minus 29.7 the previous period, the biggest decline since April 2012. The measure reached an almost five-year high in early August.

Retired librarian

Faith Williams, 72, a retired school librarian from Washington, said she’s thankful she has other sources of income to tide her over should social-security payments ever be delayed.

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