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Consumer Index in U.S. Stabilizes Close to Record Low

August 25, 2011

Press Release

The Bloomberg Consumer Comfort Index Was Minus 47 for the Period
to August 21

New York — Consumer confidence stabilized last week at a level
that’s within striking distance of an all-time low as Americans
remained pessimistic about the economy.

The Bloomberg Consumer Comfort Index was minus 47 in the week to
Aug. 21 compared with minus 48.3 reading the previous period
that halted a three-week slide. The gain was within the survey’s
3-point margin of error. The figure is close to minus 54 in
January 2009, which matched the worst reading in the history of
the series dating back to 1985.

For full CCI results, see:

Confidence among those earning more than $100,000 a year fell in
the past month to the lowest level since 2009, possibly due to
stock market weakness and mounting concern the recovery may
falter. Unemployment above 9 percent has also soured consumers’
moods, posing a risk of further erosion of household spending
that accounts for 70 percent of the economy.

“The consumer sector remains historically weak, which is one
reason why investors are likely to not find much comfort in the
modest improvement in sentiment,” said Joseph Brusuelas, a
senior economist at Bloomberg LP in New York.

Another report today showed first-time applications for jobless
benefits increased by 5,000 to 417,000 in the week ended Aug.
20, according to the Labor Department. Claims were pushed up by
a labor dispute at Verizon Communications Inc.

Stocks climbed after Warren Buffett’s Berkshire Hathaway Inc.
agreed to invest in Bank of America Corp. The Standard & Poor’s
500 Index rose 0.6 percent to 1,185.08 at 9:39 a.m. in New York.

Recession Levels
Even after last week’s gain in confidence, the Bloomberg comfort
index has been stuck below minus 40, the level associated with
recessions or their aftermath, since the end of February.

“The slim good news is that the slide has halted,” Gary Langer,
president of Langer Research Associates LLC in New York, which
compiles the index for Bloomberg, said in a statement. “The bad
is that the index nonetheless remains in a dreadful state.”

The gauge, which began December 1985, has averaged minus 45.1
this year, compared with minus 45.7 for all of 2010 and minus
47.9 in 2009, the year the last recession ended, the report

The comfort survey showed improvement in two of the three
subcomponents. The index of Americans’ views of the economy rose
to minus 84.3 last week from minus 85.4. The gauge of personal
finances climbed to minus 4.5 after a minus 8.4 reading in the
prior period. A measure of the buying climate dropped to minus
52.4 from minus 51.2.

Confidence among households with annual income exceeding
$100,000 fell last week to minus 19, and the average over the
past month was the lowest since 2009. For those making less than
$15,000 a year, the comfort index dropped to minus 80.9, the
worst reading in a year.

Sentiment among Americans with college educations dropped to
minus 40.6, the weakest level since April 2010.

Democrats are also feeling more downbeat as their confidence
gauge fell to minus 55, the lowest reading since March 2010.
Sentiment among Republicans improved to minus 44.4, widening the
gap between the two parties to 10.6 points, the most since
March. Political independents’ confidence rose to minus 42.8,
the best reading since April.

In the past month, confidence “has slid by 15 points among
Democrats but held essentially steady among Republicans, perhaps
signaling a shift in trajectories — one worth watching in the
2012 election season,” Langer said in the statement.

Other measures of sentiment are equally gloomy. The Thomson
Reuters/University of Michigan preliminary index of consumer
sentiment plunged in August to a three-decade low.

Consumers’ reluctance to spend is hurting results at retailers.
American Eagle Outfitters Inc. (AEO), a Pittsburgh-based teen
apparel chain, yesterday reduced its full-year profit forecast,
citing higher costs for cotton and “tempered” sales expectations
for the second half of the year.

“The lack of an economic recovery has created a persistently
challenging retail environment,” James O’Donnell, chief
executive officer, said on a conference call.

The Bloomberg Consumer Comfort Index is based on responses to
telephone interviews with a random sample of 1,000 consumers
aged 18 and over. Each week, 250 respondents are asked for their
views on the economy, personal finances and buying climate; the
percentage of negative responses is subtracted from the share of
positive views and divided by three. The most recent reading is
based on the average of responses over the previous four weeks.

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. The
margin of error for the headline reading is 3 percentage points.

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

Contact for Bloomberg:

Meghan Womack, +1 212-617-8514,