WASHINGTON, D.C. -- As federal lawmakers debate how to avoid a government shutdown and raise the debt limit, the uncertainty seems to be taking a toll on Americans' confidence in the economy. Gallup's Economic Confidence Index fell five points to -20 last week, the lowest weekly score since automatic federal budget sequestration cuts took effect in early March. Economic confidence is now much worse than it was in May and June.

Americans' declining confidence in the economy last week came as negotiations in Congress intensified over funding the federal government by the Sept. 30 deadline. The Republican-led House of Representatives passed a spending bill last Friday that would fund the federal government, but also would eliminate funding for the Affordable Care Act. Senate Democrats and President Barack Obama have stated that they would not support such a bill, which increases the likelihood of a government shutdown unless both sides can reach a compromise.

Lawmakers in Washington also need to raise the legal debt limit before mid-October to keep the nation from having to default on its debts.

Gallup's economic confidence trend reveals that similar fiscal debates have negatively affected consumer confidence. After the debt-ceiling crisis in the summer of 2011 -- coupled with Standard & Poor's subsequent downgrading of the U.S. credit rating for the first time in the country's history and major declines in the U.S. stock market -- Gallup's Economic Confidence Index plunged to the lowest levels seen since the 2008-2009 economic recession.

Americans' confidence in the economy also slipped in late 2012 and early 2013 after the fiscal cliff debate and in early March after the federal budget sequestration negotiations. However, consumer confidence recovered quickly after both events and peaked at its weekly high since 2008 in late May and early June.

Gallup's Economic Confidence Index is based on two components: Americans' assessments of current economic conditions in the United States and their perceptions of whether the economy is getting better or worse. Most of the five-point decline in the overall index last week is due to Americans' deteriorating economic outlook rather than their views of the economy's current health. This pattern suggests the looming government shutdown and debt-limit debate are likely causes of declining confidence more generally.

Americans' net economic outlook fell nine points last week to -20, the lowest score since the week ending March 3. This represents 38% of Americans saying the economy is "getting better" and 58% saying it is "getting worse."

At the same time, Americans' net ratings of current conditions were more stable last week at -19, compared with -18 the prior week. The current score represents 18% of Americans saying current economic conditions are "excellent" or "good" and 37% saying they are "poor." So for the first time since early March, Americans' economic outlook is slightly worse than their ratings of current economic conditions.

Implications

As leaders in Washington work to reach an agreement to fund the federal government and avoid a government shutdown by Sept. 30, Americans' confidence in the economy has already shown signs of weakening. If federal lawmakers cannot avoid a government shutdown or prevent the nation from defaulting on its debt, it likely will harm an already fragile economic recovery.

Still, there are some positive indications that Americans' economic confidence may be more resilient than it was during the 2011 debt crisis. The U.S. stock market has remained strong thus far during the fiscal debates, and even reached record highs last week after the Federal Reserve announced that it would not yet taper its bond-buying program. With fiscal crises becoming increasingly common in Washington, Wall Street investors may not be as alarmed as they were during prior fiscal debates. Additionally, the economy is generally stronger than it was two years ago during the 2011 debt limit crisis, and confidence did recover relatively quickly after the fiscal cliff and budget sequestration debates.

Gallup.com reports results from these indexes in daily, weekly, and monthly averages and in Gallup.com stories. Complete trend data are always available to view and export in the following charts:

Daily: Employment, Economic Confidence, Job Creation, Consumer Spending

Weekly: Employment, Economic Confidence, Job Creation, Consumer Spending

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