Economy | - Part 30

Consumer Sentiment Drops to 9-Month Low

Though not as bad as the latest Gallup survey on the American mood noted here the other day, the Reuters/University of Michigan consumer sentiment index fell to its lowest level since January, down from 77.5 in September to 75.2 in the first of two readings for October.

The fiscal mess in Washington that now includes a government shutdown along with a looming debt ceiling crisis were the the proximate causes of the most recent decline, as similar events in mid-2011 and late-2012 also led to sagging confidence as shown below.

Consumer sentiment

Surprisingly, the current conditions index edged up, from 92.6 in September to 92.8 in October, but the expectations component fell from 67.8 to 63.9, its lowest level of the year.

The 12-month outlook continued its recent free-fall, tumbling another 15 points to just 71, its lowest level since December 2011 just after the last debt ceiling crisis. This gauge of Americans’ long-term outlook was over 100 as recently as a few months ago.

Survey director Richard Curtin noted:

Consumer confidence posted a surprisingly small decline in early October despite widespread awareness of the government shutdown. The muted response may be due to consumers giving progressively less credence to the economic scare tactics that have framed the debates over the past few years

To be sure, this can quickly change if the impasse continues.

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When Confidence Fails

Obviously, it’s going to be pretty interesting to see how this all works out but, so far, the degree to which confidence in the U.S. economy has been shaken by the latest fiscal showdown in Washington has few parallels as shown below via this item at Gallup.

This polling series began in January 2008, so, there’s no way of knowing how the recent decline (see here for the chart) looks in a broader historical context.

My guess is that, in addition to Lehman Brothers in 2008, Hurricane Katrina in 2005 and, possibly, the stock market crash in 2000-2001 were the only other events in the 21st century to prompt a bigger decline in consumer confidence.

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Kathleen Sebelius on The Daily Show

In case you missed it on Monday night, Health and Human Services Secretary Kathleen Sebelius showed up on the Daily Show with Jon Stewart to talk about the roll-out of the Affordable Care Act. Things didn’t go too well, a conclusion that can be gleaned from the results of a Google search for “Kathleen Sebelius Daily Show disaster“.

Stewart panders to his key demographic over and over during the interview by asking for a delay in sign-ups for individuals and then asks whether Sebelius lied to him.

Surely, the claim that there’s nothing unusual about the percentage of part-time jobs being created this year is deserving of some Pinocchios from somebody.

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Meet Janet Yellen, Your New Fed Chair

Ambrose Evans-Pritchard put it best in this commentary at the Telegraph on Fed Vice Chair Janet Yellen’s imminent nomination to succeed Fed Chief Ben Bernanke at the central bank:

Rejoice: the Yellen Fed will print money forever to create jobs

We now know where we stand. Janet Yellen is to take over the US Federal Reserve, the world’s monetary hegemon, the master of all our lives.

The Fed will be looser for longer. The FOMC will continue to print money until the US economy creates enough jobs to reignite wage pressures and inflation, regardless of asset bubbles, or collateral damage along the way.

This leaves me deeply uneasy.

Here she is – get used to seeing the new face of the Federal Reserve:

Janet Yellen

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