Americans’ confidence in the economy is slowly increasing, and has significantly improved from the mid-October shutdown.
This suggests that record-high U.S. stock market prices and the Bureau of Labor Statistics report of better-than-expected job gains in October may have boosted Americans’ confidence. Increasing confidence also indicates that the well-publicized technical problems plaguing the federal health exchange website have not affected Americans’ views of the economy.
Americans’ confidence appears to be recovering more slowly than it did after other recent instances of partisan brinkmanship. However, economic confidence took about five months to recover after the 2011 debt ceiling crisis, likely related to the subsequent downgrading of the U.S. credit rating and plummeting stock prices, set against the backdrop of a generally weaker economy at that time. Now that the shutdown has ended, the recovery in confidence is occurring as a reverse mirror image of the decline, with the outlook component improving more than ratings of current conditions.
The euro recovery lost steam. Growth in Germany slowed. Third quarter economic expansion increased just 0.3%, versus 0.7% in the previous quarter. The French economy contracted, third quarter GDP shrank 0.1% and in the UK retail sales fell 0.7% due to falling fuel and telecom prices. All indicators were below expectations. It appears that Italy and Spain’s budgets will not conform to the tough debt rules previously agreed by them for guarantees for loan extensions.