“Consumer sentiment took a giant step back in December, as the looming fiscal cliff made its first measurable dent on the public’s psyche,” Steve Goldstein reports for MarketWatch. “The preliminary University of Michigan-Thomson Reuters consumer sentiment index fell to 74.5 from 82.7 in November. That’s far below the 82.0 expected in a MarketWatch-compiled economist poll, eliminating four months of gains and also representing the biggest one-month drop since March 2011.”
“A series of tax hikes and spending cuts, called the fiscal cliff, is due to hit next year unless Congress reaches an agreement to avoid it,” Goldstein reports. “House Speaker John Boehner on Friday said there was no progress on talks. The Congressional Budget Office has forecast the economy to grind to a halt were the full fiscal cliff implemented.”
Goldstein reports, “‘With no clear resolution to the fiscal cliff yet in sight, it appears uncertainty over future taxes are now beginning to have a significant impact on consumer sentiment. Should a resolution be forthcoming, this decline could prove to be a temporary blip, although the longer it rolls on for the more likely sentiment (and possibly consumer spending) is to be further dampened,’ said Andrew Grantham of CIBC World Markets in a note to clients.”
Read more in the full article here.