Consumer sentiment breaks even, with no sign of major shutdown angst

Consumer sentiment remains steady in October, with Americans feeling skittish about high prices and poor job prospects but showing no signs of panic over the government shutdown, according to a key index.

The University of Michigan’s preliminary readout of consumer sentiment stood at 55 compared to a 55.1 reading in September.

The closely watched barometer is one of only a few data points available to investors clamoring for insights during the shutdown-fueled blackout of federal economic data.

“Overall, consumers perceive very few changes in the outlook for the economy from last month. Pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds,” Michigan analysts said. “At this time, consumers do not expect meaningful improvement in these factors. Meanwhile, interviews reveal little evidence that the ongoing federal government shutdown has moved consumers’ views of the economy thus far.”

The Michigan index is compiled from surveys with hundreds of households and gauges consumers’ personal finances willingness to spend.

A higher number suggests higher confidence, which could lead to higher consumption and economic growth.

President Trump says his economy will begin to roar under his agenda of tax cuts, deregulation and taxes on imports. Wall Street is seeing record highs, though stocks took a sudden dive Friday upon news that Mr. Trump might reimpose massive tariffs on Chinese imports over Beijing’s decision to restrict rare-earth exports.

Businesses, farmers and consumers point to uncertainty around the administration’s ever-changing trade and tariffs plans, and hiring has seen a marked slowdown in recent months.

Mr. Trump wants the Federal Reserve to cut interest rates to give borrowers better terms and juice the economy. However, central bankers are reluctant to move boldly, given the difficult mix of a sluggish job market and possible inflation.

Fed Governor Christopher Waller said Friday the central bank needs to proceed carefully.

“I’m still in the belief we need to cut rates, but we need to kind of be cautious about it,” Mr. Waller told CNBC’s “Squawk Box.”

He said the U.S. seems to be shedding jobs, yet gross domestic product remains robust.

“Something’s got to give. Either the labor market rebounds to match the GDP growth, or that GDP growth is going to pull back. So whichever way that goes, it’s got to affect what you do with policy,” Mr. Waller said. “I want to move towards cutting rates, but you’re not going to do it aggressively and fast, in case you make a big mistake on which way that things go.”

The Fed cut rates by 250 basis points, or 0.25%, in September, and there is a 95% probability of a similar cut when the bank meets at the end of October, according to CME Fedwatch.