U.S. consumer confidence dropped to a six-month low in October, as the 16-day government shutdown left many Americans worried about the economy's resilience. The decline could weigh on consumer spending, which accounts for 70 per cent of economic activity in the U.S.
The U.S. Conference Board said its consumer confidence index fell to 71.2 in October from 80.2 in September, and has declined in three of the past four months.
The impact of lower confidence could delay any decision by the Federal Reserve to wind down its ongoing purchasing of bonds, which it has been undertaking for more than a year in order to stimulate the economy.
The Federal Reserve board is meeting Tuesday and Wednesday and will announce its plans once the meeting concludes.
American consumers are particularly pessimistic about the strength of the U.S. economy in six months, and also expect less hiring in the months ahead.
Americans had seemed optimistic in the spring as job gains were healthy and economic growth improved. The Conference Board's measure reached 82.1 in June, the highest in 5 1/2 years. That's still below the reading of 90 that is consistent with a healthy economy.
The shutdown already caused a drop this month in the University of Michigan's measure of consumer sentiment. Americans made more negative references to the federal government's impact on the economy in October than at any time in the 50-year history of the survey, the university said.
Falling confidence can cause Americans to spend less, which would slow the economic growth. But sometimes consumers spend more, even when they say they are less confident.
Weaker job growth is also weighing on consumers' outlook. Employers added an average of just 143,000 jobs a month from July through September. That's down from 182,000 a month in April through June and 207,000 in the first three months of the year.
Sluggish spending is likely to weigh on economic growth. Most economists predict growth slowed in the July-September quarter to an annual rate of about 1.5 to 2 per cent, down from a 2.5 per cent rate in the April-June quarter. And the shutdown is likely to keep growth at a tepid pace for the final three months of the year.