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A reading on U.S. consumer confidence today showed surprisingly pessimistic views about the economy. The index now stands at 58.6, down from 66.7 in December, and well below the consensus estimates of 64. This is the weakest reading since November of 2011.
The surprise reading has a few economists scratching their heads, especially in light of gains in housing, a strong stock market and a stop-gap resolution the fiscal-cliff stalemate. As it turns out, economists may have underestimated the impact of higher payroll taxes.
Lynn Franco, Director of Economic Indicators at The Conference Board said, “Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The increase in the payroll tax has undoubtedly dampened consumers’ spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock.”
Consumers, it seems, are more concerned about their own budgets compared to the national budget, which in hindsight should have come as no surprise.
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