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Reuters
WASHINGTON
US consumer sentiment tumbled in early January to its lowest level since President Donald Trump was elected more than two years ago as an ongoing partial shutdown of the federal government and financial market volatility stoked fears of a sharp deceleration in economic growth.
The drop in confidence reported by the University of Michigan on Friday is the clearest sign yet that the impasse in Washington over Trump’s demands for $5.7 billion to help build a wall on the United States’ border with Mexico was negatively impacting the economy. Trump has touted high consumer confidence as an indication of the good job he is doing on the economy.
While consumer sentiment remains relatively high, the gathering dark clouds over the economy could make households more cautious about spending, leading to slower growth. Consumer spending accounts for more than two-thirds of the U.S. economy.
“This report on consumer sentiment is the first concrete evidence that the economy is going to fall and fall hard if Washington does not end the shutdown,” said Chris Rupkey, chief economist at MUFG in New York.
“It is going to be hard to see real GDP growth of more than 1 to 1-1/2 percent in the first quarter if the consumer goes on a buying strike.”
The longest government shutdown in the history of the United States has left some 800,000 government workers without a paycheck. Private contractors working for many government agencies are also without wages.
The University of Michigan said its consumer sentiment index fell 7.7 percent to a reading of 90.7 this month, the lowest reading since October 2016 and the steepest drop since September 2015. Economists had forecast a reading of a 97.0.
WASHINGTON
US consumer sentiment tumbled in early January to its lowest level since President Donald Trump was elected more than two years ago as an ongoing partial shutdown of the federal government and financial market volatility stoked fears of a sharp deceleration in economic growth.
The drop in confidence reported by the University of Michigan on Friday is the clearest sign yet that the impasse in Washington over Trump’s demands for $5.7 billion to help build a wall on the United States’ border with Mexico was negatively impacting the economy. Trump has touted high consumer confidence as an indication of the good job he is doing on the economy.
While consumer sentiment remains relatively high, the gathering dark clouds over the economy could make households more cautious about spending, leading to slower growth. Consumer spending accounts for more than two-thirds of the U.S. economy.
“This report on consumer sentiment is the first concrete evidence that the economy is going to fall and fall hard if Washington does not end the shutdown,” said Chris Rupkey, chief economist at MUFG in New York.
“It is going to be hard to see real GDP growth of more than 1 to 1-1/2 percent in the first quarter if the consumer goes on a buying strike.”
The longest government shutdown in the history of the United States has left some 800,000 government workers without a paycheck. Private contractors working for many government agencies are also without wages.
The University of Michigan said its consumer sentiment index fell 7.7 percent to a reading of 90.7 this month, the lowest reading since October 2016 and the steepest drop since September 2015. Economists had forecast a reading of a 97.0.
