US consumer confidence takes a dive

Consumer confidence in the US economy declined sharply in October, the Conference Board said Tuesday. After a slight increase in August and a downturn in September, the index declined from 80.2 to 71.2 in October, the month of the partial government shutdown, research firm said. The Present Situation Index fell from 73.5 to 70.7 while the Expectations Index, which measures confidence in the economy six months down the road, dropped from 84.7 in September to 71.5 in October. The indexes use 1985 as a starting point for comparisons. The averages for that year were assigned values of 100. In the October survey that involved more than 5,000 households, the percentage of respondents who indicated they believe business conditions were "good" fell from 20.7 percent to 19 percent while those indicating a belief that business conditions were "bad" fell from 23.9 percent to 23 percent. The percentage of respondents indicating jobs were "plentiful," was unchanged at 11.3 percent, while those indicating jobs were difficult to get rose from 33.6 percent to 35.8 percent. "Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers' expectations," Lynn Franco, director of Economic Indicators at The Conference Board, said in a statement. "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 1995-96. However, given the temporary nature of the current resolution, confidence is likely to remain volatile for the next several months," Franco said. A sharp downturn in consumer confidence just before the year's most critical shopping season is likely to have an impact on equity markets, where investors look for hints that consumer spending is in good shape.