With the government shutdown weighing on expectations, the Conference Board released a report on Tuesday showing a substantial deterioration in U.S. consumer confidence in the month of October.
The Conference Board said its consumer confidence index tumbled to 71.2 in October from an upwardly revised 80.2 in September. Economists had been expecting the index to fall to 75.0 from the 79.7 originally reported for the previous month.
With the much steeper than expected monthly decrease, the consumer confidence index fell to its lowest level since April.
Lynn Franco, Director of Economic Indicators at the Conference Board, said, "Consumer confidence deteriorated considerably as the federal government shutdown and debt-ceiling crisis took a particularly large toll on consumers' expectations."
"Similar declines in confidence were experienced during the payroll tax hike earlier this year, the fiscal cliff discussions in late 2012, and the government shutdown in 1995/1996," she added. "However, given the temporary nature of the current resolution, confidence is likely to remain volatile for the next several months."
The report showed a sharp drop in consumers' expectations, with the expectations index plummeting to 71.5 in October from 84.7 in September.
Consumers expecting business conditions to improve over the next six months fell to 16.0 percent from 20.6 percent, while those expecting conditions to worsen rose to 17.5 percent from 10.3 percent.
The outlook for the labor market was also more pessimistic, with consumers expecting more jobs in the months ahead falling to 15.3 percent from 16.1 percent, while those anticipating fewer jobs increased to 22.7 percent from 19.1 percent.
While the report also showed that consumers expecting their incomes to decrease rose to 15.4 percent from 13.9 percent, those expecting their incomes to increase climbed to 15.8 percent from 15.1 percent.
The Conference Board also said its present situation index fell to 70.7 in October from 73.5 in September, reflecting a moderate decline in consumers' assessment of current conditions.
Consumers saying business conditions are "good" decreased to 19.0 percent from 20.7 percent, although those saying business conditions are "bad" also edged down to 23.0 percent from 23.9 percent.
The report also showed that the proportion of consumers saying jobs are "plentiful" was virtually unchanged at 11.3 percent, while those saying jobs are "hard to get" rose to 35.8 percent from 33.6 percent.
"The shutdown took a bite from consumer confidence in October," said Chris Low, chief economist at FTN Financial. "Hopefully it rebounds in November, because a drop this big, if sustained, typically means significant weakness in retail sales."
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