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Consumer Confidence in U.S. Falls Last Week to Two-Month Low

August 4, 2011

Press Release

The Bloomberg Consumer Comfort Index Was Minus 47.6 in the
Period to July 31

New York — Consumer confidence in the U.S. dropped last week to
the lowest level in more than two months, paced by growing
dissatisfaction among women and high earners.

The Bloomberg Consumer Comfort Index was minus 47.6 in the
period to July 31, the lowest since May, compared with minus
46.8 the prior week. Confidence among women fell to the lowest
level since October 2009, while Americans making more than
$100,000 a year were the most pessimistic since November 2009.

For full CCI results, see:

The biggest one-week drop in the Standard & Poor’s 500 Index in
a year, political wrangling over raising the debt ceiling and a
stagnant job market probably weighed on consumers’ moods. The
loss of confidence heightens the risk that consumer spending,
which accounts for 70 percent of the economy, will be slow to
rebound in the second half of the year.

The comfort gauge “has resided at recession-like levels for some
time, and the likely direction of the economy now reflects
that,” said Joseph Brusuelas, a senior economist at Bloomberg LP
in New York. “The cumulative impact of a weak labor market and
the recent spate of announced mass layoffs over the past two
months has probably put a significant dent in the consumer

Another report today indicated limited improvement in the job
market. Applications for unemployment insurance payments fell by
1,000 in the week ended July 30 to 400,000, the fewest in four
months. Economists forecast a climb to 405,000 claims, according
to the median estimate in a Bloomberg News survey.

Today’s comfort report showed sentiment among Democrats fell to
the lowest level since February, while confidence among
Republicans dropped to a nine-week low. Democrats were 8 points
more pessimistic than Republicans, the biggest gap since March.

The report underscores “the impact of political brinksmanship on
already tender economic sentiment,” Gary Langer, president of
Langer Research Associates LLC in New York, which compiles the
index for Bloomberg, said in a statement.

President Barack Obama signed a bill this week raising the U.S.
debt ceiling by at least $2.1 trillion and reducing federal
spending by $2.4 trillion or more, after party leaders spent
months wrangling over the measure.

The Bloomberg Consumer Comfort Index has been minus 40 or less,
a region typically associated with recessions and their
aftermath, for 170 of the past 172 weeks. That’s “an
unprecedented period in the dumps, with every tentative breakout
attempt, to date, quickly cut short,” said Langer.

Two of the comfort index’s three subcomponents declined last
week. The measure of personal finances fell back into negative
territory after two weeks of positive readings. The buying
climate index fell to the lowest level since early June. A
backup in fuel prices may explain the deterioration.

After reaching a three-month low of $3.54 a gallon in late June,
the average price of regular gasoline climbed to $3.71 at the
end of last week. The comfort gauge reached a nine-month low of
minus 49.4 in May after gasoline climbed to $3.99 a gallon.

The gauge of Americans’ views of the economy, which is the
difference between those with positive versus negative opinions,
rose to minus 86.5 from a more than two-year low. Even here, the
news wasn’t good. Fifty percent of respondents gave the economy
a poor rating, the worst of four categories. That’s the highest
share in more than a year.

Falling share prices may be to blame for the drop in sentiment
among those with the highest incomes. Weekly changes in the
overall comfort gauge have moved in the same direction as the
Dow Jones Industrial Average about 80 percent of the time since
the measure’s inception in 1985, according to Langer.

Stocks fell today. The Standard & Poor’s 500 Index dropped 1.5
percent to 1,241.92 at 9:40 a.m. in New York.

The outlook among those with a full-time job declined to minus
39.3, the weakest reading since March, indicating that even
employed consumers may be hesitant to shop, today’s report

Consumer spending dropped in June for the first time in almost
two years as savings climbed, Commerce Department figures showed
earlier this week. The U.S. economy grew less than forecast in
the second quarter after almost stalling at the start of the
year, another report from the agency showed.

The Bloomberg comfort index, which began in December 1985, has
averaged minus 44.7 this year compared with minus 45.7 for all
of 2010 and minus 47.9 in 2009, the year the recession ended,
the report showed.

The measure has been less volatile than other confidence gauges,
hovering this year within about 5 points of the 2011 average. In
contrast, the Thomson Reuters/University of Michigan index of
consumer sentiment dropped in July to its lowest level in more
than two years. The Conference Board’s index unexpectedly rose
in July from an eight-month low.

Smaller employment gains and lagging consumer confidence are
holding back the economic recovery, said Jenny Lin, senior U.S.
economist for Ford Motor Co. (F) U.S. employers in July probably
boosted payrolls at a pace that failed to reduce the jobless
rate, according to a Bloomberg News survey before a Labor
Department report tomorrow.

“The budget negotiations likely contributed to the drop in
confidence, which has cast a shadow on the modest recovery so
far,” Lin said on an Aug. 2 conference call with analysts. “The
modest labor market recovery is holding back income gains and
consumer confidence.”

The Dearborn, Michigan-based automaker reported an increase in
sales in July that trailed analyst estimates.

The Bloomberg Consumer Comfort Index is based on responses to
telephone interviews with a random sample of 1,000 U.S.
residents age 18 and over. Each week, 250 respondents are asked
for their views on the economy, personal finances and buying
climate. Results are combined with data from the previous three
weeks, and the percentage of negative responses is subtracted
from the share of positive views on each question, with the
results then averaged.

The comfort index can range from 100, indicating every
participant in the survey had a positive response to all three
components, to minus 100, signaling all views were negative.

Field work for the index is done by Social Science Research
Solutions in Media, Pennsylvania.

Contact for Bloomberg:

Meghan Womack, +1 212-617-8514,