Wednesday, September 7, 2011

What's Killing Consumer Confidence?

As we noted last week, consumer confidence fell through the floor in August, with the biggest single-month decrease in the Consumer Board's benchmark Consumer Confidence Index since October 2008, the month after the financial sector collapsed. Another reading, a consumer survey run by the University of Michigan, now finds confidence at its fourth-lowest level since 1956.

Wall Street Journal columnist Gerald F. Seib looked at the Michigan numbers, and was able to pinpoint the moment at which consumers lost all that faith: the debt-ceiling battle. During the negotiations over the debt ceiling, consumer confidence took a hit similar to those it suffered through the Iranian hostage crisis or the Lehman Brothers bankruptcy. Not surprisingly, 71 percent of Americans say they are unhappy with the way the debt negotiations were handled.

Seib calls the whole spectacle "Washington at its worst." But unlike, say, the Lehman Brothers meltdown, the same actors are still in place and capable of redeeming themselves. The question now becomes: What, if anything can Washington do to rebuild consumer confidence?

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