• by Thom Forbes  @tforbes, December 28, 2012

As politicians fail to get real about fiscal cliff negotiations, consumer fears about the impact of the impasse -– including an imminent 2% hike on taxes deducted from their paychecks -- is evidently hitting home. The Conference Board reported yesterday that its Consumer Confidence Index fell to 65.1 in December from a downwardly revised 71.5 in November, representing the lowest level in four months.

“The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff,” said Lynn Franco, director of economic indicators at The Conference Board, pointing to similar drop in sentiment during the debt ceiling discussions in 2011.

“The new data comes as Washington policymakers seem to be making zero headway on avoiding the confluence of policies making up the cliff, which economic experts warn could push the nation into a recession if allowed to take effect in 2013,” Peter Schroeder tells us in “On the Money,” The Hill’s economic blog.

On the bright side, however, “while consumers are quite negative about the short-term outlook, they are more upbeat than last month about current business and labor market conditions,” Franco continued. Those stating business conditions are “good” rose to 17.1% percent from 14.6%, while those stating business conditions are “bad” decreased to 27.3% from 31.2%.

“People are realizing that we may not get a compromise and they’re getting nervous,” RBS Securities economist Guy Berger, tells the New York Times’ Nelson D. Schwartz. “It’s a precarious situation. So far consumers are worried about the future. Once they start worrying about the present, we’re in trouble.”

Michael Griffin, executive director at Corporate Executive Board, tells Schwartz that consumer attitudes seem to have “caught up with business confidence.” Its surveys have shown business sentiment weakening for three consecutive quarters.

“Undoubtedly,” Joshua Shapiro, chief U.S. economist at MFR Inc., tells the Wall Street Journal’s Steven Russolillo, “all the negative news surrounding the dysfunction in Washington surrounding the fiscal cliff negotiations contributed to the December showing.”

Not that the dysfunction itself –- what’s new about that? -- is necessarily the cause for panic. It’s the looming repercussions. Dean Maki, the top U.S. economist at Barclays Capital, tells CNNMoney’s Jose Pagliery that the report showed consumers “recognize that they face a large potential drop in income if no agreement on the fiscal cliff is reached soon.”

If you’re not feeling surrounded by bad news already, a University of Michigan survey released last week showed a five-month low in consumer confidence and a report this week from MasterCard Advisors SpendingPulse indicated holiday sales grew in the two months before Christmas at the weakest rate since 2008, according to a report by the Associate Press’ Paul Wiseman running in USA Today.

“The gloomy consumer sentiment "is obvious confirmation that a sudden and serious deterioration in hopes for the future took place in December -- presumably reflecting concern about imminent 'fiscal cliff' tax increases," Pierre Ellis, economist with Decision Economics, wrote in a note to clients, Wiseman reports.

Not all forecasts are dank, however. Bloomberg’s Consumer Comfort Index held close to a four-year high last week, Bloomberg’s Michelle Jamrisko reports in the Washington Post. The comfort index slipped to minus 32.1 in the period ended Dec. 23 from minus 31.9 the week before -– and less than a point from an April reading that was the highest since March 2008.

“Households are increasingly confident about their own personal finances, which is likely to sustain the improvement in consumer sentiment in 2013, albeit at low levels,” according to Bloomberg Senior Economist Joseph Brusuelas. “This is part and parcel of the historically slow expansion the U.S. is currently experiencing.”

And in other positive news yesterday, the Commerce Dept. said new single-family home sales rose in November by the fastest pace in 2 1/2 years –- 4/4% -- while median sales price jumped to $246,200, up 14.9% from the same month in 2011, Reuters’ Jason Lange reports. In addition, “new home building is expected to add to economic growth this year for the first time since 2005.”

The final year-end forecast? You may not have to be a weatherman to know which way the economic winds are blowing, but right now they are so variable as to seem unpredictable.

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