Consumer Sentiment Drops Amid Trade and Shutdown Tensions

The University of Michigan’s index of U.S. consumer sentiment fell to its lowest level since October 2016 in January, with a preliminary reading of 90.7. This falls far below the forecast of economists surveyed by The Wall Street Journal, who expected a reading of 96.4.

According to Richard Curtin, the survey’s economist, the low result reflects a number of consumer worries, including the government shutdown, the global economy and volatile markets, and trade uncertainty. However, WSJ’s David Harrison and Sharon Nunn note that the economy remains on solid ground, with strong hiring and rising wages.

Analysts see few signs of a recession brewing and expect consumer sentiment to rebound once the shutdown is resolved.

“As soon as the government opens back up, whatever damage was done by the shutdown in consumer attitudes will probably reverse pretty quickly,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.

The consumer sentiment index also fell the last time the government shut down in 2013 but recovered once the government reopened, said Jim O’Sullivan, chief U.S. economist at High Frequency Economics.