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U.S. consumer morale lowest in two years

Staff Writer |
U.S. consumer sentiment tumbled in early January to its lowest level since President Donald Trump was elected.

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The drop in confidence reported by the University of Michigan on Friday is the clearest sign yet that the impasse in Washington over Trump’s demands for $5.7 billion (£4.4 billion) to help build a wall on the United States’ border with Mexico was negatively impacting the economy.

Consumer spending accounts for more than two-thirds of the U.S. economy. The University of Michigan said its consumer sentiment index fell 7.7 percent to a reading of 90.7 this month, the lowest reading since October 2016 and the steepest drop since September 2015. Economists had forecast a reading of a 97.0.

The survey’s measure of current economic conditions decreased to 110.0 from a reading of 116.1 in December. Its measure of consumer expectations tumbled to a reading of 78.3, the lowest since October 2016, from 87.0 in late December.

The broad-based jump in manufacturing output in December reported by the Federal Reserve could allay fears of a sharp slowdown in factory activity.

Manufacturing activity, which accounts for about 12 percent of the economy, is slowing as some of the boost to capital spending from last year’s $1.5 trillion tax cut package fades. In addition, a strong dollar and cooling growth in Europe and China are hurting exports. Lower oil prices are also slowing purchases of equipment for oil and gas well drilling.

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