US consumersâ€™ outlook on the economy and their finances fell sharply in early December, likely due to concern about the potential for higher taxes resulting from contentious political discussions in Washington over fiscal issues, according to a University of Michigan survey released Friday.
The universityâ€™s preliminary December reading on consumer sentiment plunged to 74.5, the lowest level since August. It was far below the November figure of 82.7 and the 82.4 expected by economists.
The surveyâ€™s measure of current economic conditions fell slightly to 89.9 in early December from the November final reading of 90.7. The gauge of short-term consumer expectations fell sharply to 64.6, its lowest level in four months, from 77.6 last month. The surveyâ€™s measure of consumersâ€™ 12-month outlook also fell sharply in early December, dropping 22 points from late November to 75, the lowest level since August.
â€œConfidence plunged in early December as consumers confronted the rising likelihood that political gridlock would push the country over the fiscal cliff,â€ survey director Richard Curtin said in a statement. He was referring to worries of a recession next year if the White House and Congress fail to reach a budget deal.
Consumer-confidence indexes are closely watched for clues about consumer spending, which accounts for about 70 percent of U.S. economic activity.