Fiscal Cliff Whacks Consumer Confidence and Stocks

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The fiscal cliff is a combination of tax cuts expiring at the end of the year along side of a reduction in government spending. It was brought on by Washington’s inability to compromise during last year’s debt ceiling standoff and is a cause of concern for many Americans.

The Conference Board, a private research group, announced on Thursday that its index of consumer confidence declined to 65.1 in December, compared to a revised 71.5 in the previous month, which was first reported as 73.7. The December index reading is the biggest drop in confidence since August 2011, when Congress was in gridlock over raising the debt ceiling. Economists surveyed by Dow Jones Newswire and Bloomberg expected consumer confidence to come in at 70.0.

While the present situation index increased from 57.4 to 62.8, Americans are feeling more pessimistic about the future. The expectations index fell sharply from 80.9 in November to only 66.5 in December, its lowest level in about a year.

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Says Lynn Franco, Director of Economic Indicators at The Conference Board, explains, “Consumers’ expectations retreated sharply in December resulting in a decline in the overall Index. The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff. A similar decline in expectations was experienced in August of 2011 during the debt ceiling discussions.”

Other reports also indicate a dismal picture for Americans…

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