Federal Budget Battle Weighs on Economic Confidence: Gallup

24/7 Wall St.

American’s confidence in the U.S. economy posted a five-year high in May of -7 on Gallup’s economic confidence index. Since then, it has been all downhill, to a September reading of -19. That was identical with the reading in September 2012.

Gallup’s survey was taken before the federal government shutdown, but as the month of September wore on confidence declined as the prospects for avoiding the shutdown dimmed. In the week ending September 29, the index reading was -22. That is still a far cry from the -52 reading of August 2011, when the debt ceiling debate appeared about to push the U.S. into default on its loans. That debate is now staring the U.S. in the face again.

Gallup noted:

The public's confidence, particularly its perceptions of whether the economy is getting better or worse, will be further tested if the shutdown continues and begins to affect Americans in their daily lives. … Gallup polling during a similar partisan battle in 1995-1996 showed that Americans' views about the U.S. economy generally held steady during and after the government shutdown. … [C]onfidence in the economy did recover several months after the 2011 debt crisis, and quickly after the fiscal cliff debate and budget sequestration cuts [earlier this year]. Thus, Americans' views about the U.S. economy seem to experience longer-term negative effects after the economy takes a hit, as it did during the 2008-2009 recession.

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