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Consumer Confidence Already Falling Before Government Shutdown

Jon C. Ogg

Despite all the economic improvements and the controversy around whether Ben Bernanke should have tapered the bond buying, the Conference Board is showing a slight drop in the latest consumer confidence reading. The index fell in September to 79.1, after rising to 81.8 in August.

The cutoff date for the preliminary results was September 13, which was before the FOMC meeting disclosed that the $85 billion of bond buying would not yet be tapered. That also was before it looked more evident that a debt-ceiling and health care deal would or would not be struck in order to prevent a government shutdown.

We saw a rise in the Present Situation Index, followed by a drop in the Expectations Index. The Present Situation grew to 73.2 from 70.9, while the Expectations Index fell to 84.1 from 89.0 last month.

September's decline was blamed in part on concerns about the short-term outlook for both jobs and earnings, even if expectations for future business conditions were little changed. It was reported also that current business and labor market conditions were viewed more positively. Now the concern is that consumers seem uncertain that the momentum can be sustained in the months ahead.

Here were some brief statistics:

  • Those claiming business conditions are "good" increased to 19.5% from 18.7%.
  • Those claiming business conditions are "bad" decreased to 23.9% from 24.5%.
  • Those saying jobs are "plentiful" increased slightly to 11.5% from 11.3%.
  • Those saying jobs are "hard to get" decreased to a five-year low of 32.7% from 33.3%.

Equities are still in the midst of taking a breather, and bond yields have retreated off their highs. The S&P 500 was down six points at 1,695, and the Dow Jones Industrial Average was down 45 at 15,357. The yield on the 10-Year Treasury note was down three basis points at 2.683%.