Confidence Shaky in Retail

Consumer sentiment has taken a hit after the presidential election due to increased awareness by many Americans of the fiscal cliff and stock market volatility.

According to IHS Global Insight, the final Reuters/University of Michigan Consumer Sentiment expectations index fell 1.4 points compared to the final October reading.

Survey respondents are significantly more pessimistic on the future path of the economy and their personal finances since the media and politicians focused on fiscal cliff issues the day after the presidential election. Prior to November 7, most Americans were not very concerned with the fiscal cliff. There are some positives on the consumer front, such as falling pump prices, improved housing numbers, and wage gains that are likely to outpace price increases.

“If the political rhetoric and finger pointing reaches a fever pitch similar to that of the debt ceiling crisis in the summer of 2011 then consumer confidence is likely to take a very serious hit, and this holiday season will not be very cheerful, said IHS economist Chris Christopher.

Still, he expects holiday retail sales to rise 3.9% above last year, not as strong as the past couple of years, but a good showing. Holiday retail sales increased approximately 5.5% in 2011 compared to 2010.

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