Consumer confidence plummets in wake of shutdown

Consumer confidence took a big hit in October in the wake of the 16-day government shutdown and last minute debt ceiling talks.

The Conference Board reported Tuesday that its benchmark index had fallen to 71.2 from 80.2 in September. The index had been 81.8 in August. 

The fall was driven by a sharp decrease in expectations for the future. This metric dropped from 84.7 to 71.5 on a scale where 100 represents positive consumer sentiment. 

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“Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers’ expectations,” said Lynn Franco of The Conference Board. “Similar declines in confidence were experienced during the payroll tax hike earlier this year, the fiscal cliff discussions in late 2012, and the government shutdown in 1995-1996.”

She said the drop could be temporary given the fact the debt ceiling was raised and the government reopened after the House GOP backed down from its insistence that ObamaCare be defunded.

The current economic slump is primarily driven by weak demand, so the blow to consumer confidence is likely to reverberate throughout the economy. 

Standard & Poor's predicted this month that the shutdown will cost $24 billion and shave 0.6 percent off of gross domestic product.