Just as it seemed the bad news about the economy couldn’t get much worse, a new nugget of data was released Friday: U.S. consumer sentiment plummeted to a low not seen since 1980.
According to survey data released by Thomson Reuters and the University of Michigan, the mood of the nation’s consumers in August was abysmal, raising concerns about any prospect of an economic turnaround.
There’s not a lot of mystery behind the numbers, as consumers have been buffeted by weeks of bad economic headlines: a political deadlock over the government’s debt ceiling, a widening economic crisis in Europe and wild gyrations on the stock market. Economists pay close attention to consumer confidence as a driver of economic growth, given that consumer spending makes up roughly 70 percent of gross domestic product.
According to Reuters, the survey was taken before the historic decision by Standard & Poor’s to downgrade the nation’s credit rating:
"Never before in the history of the surveys have so many consumers spontaneously mentioned negative aspects of the government's role," survey director Richard Curtin said in a statement.
The drop in consumer sentiment, from 63.7 last month to 54.9, was much greater than economists predicted, according to Bloomberg. Those economists expected the number to fall between 59 and 66.5.
The stock market has weathered the bad news so far. The Dow Jones Industrial Average was up more than 1 percent by early afternoon, despite having lost ground after the consumer sentiment data was first released.
"The market's doing reasonably well considering how bad that number was," Paul Zemsky, head of asset allocation at ING Investment Management, told Dow Jones Newswires. "But we still think there's more to go on the downside as the effects of confidence start showing up in the economic data."