Confidence, confidence, confidence. Those are three qualities that seem to be lacking as investors and ordinary Americans absorb the impact of a deteriorating economy and political gridlock in Washington.
A widely watched survey of consumer sentiment fell to its lowest level since the stagflation days of the early 1980s, largely because of disgust over political brinksmanship in Washington that brought the Treasury within days, if not hours, of a government default.
A separate survey showed a huge spike in the percentage of Americans who believe there is more bad economic news in the future, with nearly 70 percent of adults saying the worst is yet to come in a financial downturn that has been dragging on for four years, whether or not it is technically described as a recession.
Yet another survey found that business confidence has declined sharply around the world amid signs of a slowdown in growth, questions about the growing U.S. debt, and fresh concerns about debt.
The preliminary August reading on the Thomson Reuters/University of Michigan's index on consumer sentiment came in at 54.9, a sharp drop from last month’s 63.7 and the lowest level since May 1980. The performance of politicians in Washington was clearly on the mind of survey respondents.
"Never before in the history of the surveys have so many consumers spontaneously mentioned negative aspects of the government's role," survey director Richard Curtin said in a statement.
A second national survey, the McClatchy-Marist poll, showed that 68 percent of Americans believe the worst of the country’s economic conditions are yet to come, while only 27 percent say the worst is behind us. The survey showed a sharp increase in pessimism. Just last month only 53 percent of those surveyed said the worst is yet to come.
Both the Marist and University of Michigan polls were conducted BEFORE Standard & Poor’s downgraded U.S. government debt last week, triggering a tumultuous week on world financial markets. Despite the negative news about consumer sentiment, the market ended the week on a positive note, with the Dow Jones industrial average gaining more than 100 points — a fourth straight day of triple-digit moves. Still the Dow has lost more than 11 percent since starting its slide in late July.
“People are upset with the process of government, and they are also upset with the difficulty they are having in making ends meet in their own lives,” said Lee Miringoff, director of the Marist College Poll in Poughkeepsie, N.Y. In addition to the political stalemate in Washington and lingering unemployment rate above 9 percent, Miringoff mentioned two seemingly intractable wars weighing on the minds of Americans.
“There is plenty to point to if you want to be grumpy,” he said.
A quarterly global business survey done by British publications The Economist and Financial Times also showed a sharp decline in optimism, or increase in pessimism, if you must.
Among more than 1,500 senior business executives surveyed in July, only 23 percent of respondents think business will improve in the next six months, while 34 percent say conditions will worsen. That is a business confidence index of minus 10.5. In the previous survey, conducted in April and May, the balance was the opposite, resulting in a confidence index of plus 19.
"Slower-than-expected growth, Europe’s debt crisis and the political wrangling in America over the country’s debt ceiling probably all played their part in a sharp swing in sentiment since the spring survey," said Daniel Franklin, executive editor at The Economist.
The results appear to be bad news for President Barack Obama as the presidential campaign season swings into gear with Republican presidential candidates competing for bragging rights and more in the Iowa straw poll this weekend. Miringoff said voters who expressed economic pessimism tended to vote Republican in last year’s midterm elections.
Yet the Marist poll also showed that a significant majority — 59 percent — believe today’s economic conditions were mostly something inherited by Obama rather than something that resulted from his policies.