Consumer sentiment weakens as fiscal crisis looms

Thu Dec 27, 2012 12:59pm EST
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By Jason Lange

WASHINGTON (Reuters) - U.S. consumer confidence fell more than expected in December, hitting a four-month low as a looming fiscal crisis sapped what had been a growing sense of optimism about the economy.

The report heightened concerns that a failure by Washington to avert planned tax hikes and spending cuts could lead households to close their wallets, threatening an economic recovery that has been steady albeit lackluster.

Other data on Thursday highlighted the positive momentum building in the economy, with the number of Americans filing new claims for jobless benefits falling to a nearly 4-1/2 year low and new home sales hitting their highest level since April 2010.

But gauges of business sentiment have weakened recently on worries Washington will go forward with plans to slash the federal deficit by about $600 billion in 2013.

Now consumers also appear apprehensive, a sign worries about the so-called "fiscal cliff" could bite into household spending.

The Conference Board, an industry group, said its index of consumer attitudes fell to 65.1 from 71.5 in November.

A sub-index measuring how consumers feel about their present situation rose to its highest level in more than four years, but a gauge of sentiment about the future plunged to its lowest point in more than a year.

"Consumers are increasingly preoccupied with the potential damage the fiscal cliff will cause to the economy and to their wallets if a deal is not reached soon," economists at RBS in Stamford, Connecticut, wrote in a research note.   Continued...

Job seekers stand in line to meet with prospective employers at a career fair in New York City in this file photo taken October 24, 2012. REUTERS/Mike Segar/Files