The fractious presidential election is taking a toll on the consumer psyche — especially among lower wage earners.
Consumer sentiment in the beginning of October fell to its lowest level since last September and its second lowest reading in two years, according to the University of Michigan Surveys of Consumer Sentiment. The index fell sharply to 87.9 from 91.2 in September.
The biggest factor in the decline was a sharp drop in confidence among households with incomes under $75,000 — to the lowest level since August of 2014. Confidence among upper income households remained high, however, at 98.3, close to a level it's been at over the past two years.
"It is likely that the uncertainty surrounding the presidential election had a negative impact, especially among lower income consumers, and without that added uncertainty, the confidence measures may not have weakened," wrote Richard Curtin, chief economist for the Surveys.
Curtin also wrote that any rebound could depend on wage increases and continued job growth. "Prospects for renewed gains, other than a relief rally following the election results, would require somewhat larger wage increases and continued job growth as well as the maintenance of low inflation. Overall, real personal consumption can be expected to increase by 2.5% through mid 2017," he wrote.
Stephen Stanley, chief economist at Amherst Pierpont, said he's not writing off the consumer yet, and says that this could be temporary dampening of sentiment, with a bounce back to come after the election.
"There have been examples in the past where sentiment seemed to dip a bit before the election. It's not very long-lasting, and it typically it reverses after," he said. The most dramatic example he recalled was in 1992, when Bill Clinton ran against George H.W. Bush.
"In '92, Michigan (survey) went down four months in a row going into the election, and then bounced 12 points in November and another six in December," he said.