Consumers Buying, But Worry Sets In About Fiscal Cliff

American consumers have seemed oblivious to the potential negative impact on them of the  so-called “fiscal cliff,” the combination of tax increases and spending cuts scheduled to go into effect Jan. 1, 2013, unless Congress and the Obama Administration can work out a deal.

But the Thomson/Reuters University of Michigan Surveys of Consumers began to note some doubt creeping in as they surveyed consumers late in November. The research group’s final Consumer Sentiment Index for November held essentially flat at 82.7—still the highest level in more than four years—but its Expectations Index recorded a 1.8% decline in November to 77.6.

“The gains in confidence ended in late November as consumers became more uncertain about when and how the fiscal cliff will be bridged,” said Surveys of Consumers Chief Economist Richard Curtin. He noted that even if a deal is reached before year’s end, the uncertainty could undermine spending during the holiday season. (Early reports from the immediate post-Thanksgiving shopping season saw record-breaking sales.) And Curtin also said that a deal that minimizes federal income tax increases but fails to extend the payroll tax cuts of the past two years could well reduce consumer optimism and spending early next year anyway.

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