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Shutdown causes plunge in consumer sentiment
Faltering confidence could hit holiday sales
The prolonged federal shutdown sent a key gauge of consumer sentiment plummeting for October to the lowest levels seen since Washington's last "fiscal cliff" crisis in at the end of last year.
The 4.3 point drop to 73.2 in the University of Michigan's consumer sentiment index reported Friday bodes badly for the critical Christmas shopping season, which gets started in the next month.
"Consumer sentiment took a hit due to the government shutdown," said Chris G. Christopher Jr., economist at IHS Global Insight. "Americans felt that the economic outlook is under threat from political finger-pointing and gamesmanship over the debt ceiling and government policy."
"That is bad news for retailers, since a more confident consumer is more likely to open their wallet for discretionary items in November and December," he said. "The holiday retail sales season does not look very bright."
Bill Thorne, senior vice president at the National Retail Federation, said retailers are no longer sure that they will attain the nearly 4 percent increase in sales they were expecting during the holiday season this year.
"Americans are retrenching," with blame going to "the grueling 16-day government shutdown, nagging debt-ceiling debate, along with complications around the rollout of the Affordable Care Act," he said.
Retailers are angry about the constant storms from Washington that keep raining on consumers' parade every time confidence seems about to rise, he said.
"Washington isn't helping one bit," he said. "While the government is happy to continue 'kicking the can down the road,' consumers are cautiously putting their cans back in the pantry for a rainy day."
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