The slump in confidence incurred by US government shutdown is likely to be reversed soon, says research consultancy Capital Economics.
The marked dip in consumer confidence to a six-month low of 71.2 in October, from 80.2 in September and analyst expectations of 75.0, is probably a reflection of shutdown, says Capital Economics' Amna Asaf. The survey period ended on the day the government reopened.
Current conditions and the expectations indices dropped, with the latter reaching a seven-month low of 71.5, from 84.7.
The reopening of government has seen equity prices rallying and the cost of gasoline and mortgages falling, fuelling predictions that confidence is likely to recover next month.
The expectations index looks to be pointing to a sharp slowdown but, says Asaf, spending probably won't be this weak. Capital Economics cite the "more timely" (its daily) Gallup measure of confidence, which has already bounced back since the government reopened: "the weekly chain store figures suggest that retail sales growth suffered only a modest slowdown in October."