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Consumers Most Negative on U.S. Economy Since Recession

August 18, 2011

Press Release

The Bloomberg Consumer Comfort Index Was Minus 48.3 for the
Period to August 14

New York — Consumer confidence in the U.S. economic outlook
slumped in August to the lowest level since the recession,
raising the risk that spending will dry up.

The Bloomberg Consumer Comfort Index’s monthly expectations
gauge dropped to minus 34, the weakest since March 2009, from
minus 22 in July. The weekly measure of current conditions was
minus 48.3 for the period ended Aug. 14 compared with minus
49.1, which was the worst reading since mid-May.

For full CCI results, see: http://www.bloomberg.com/cci

The most unstable market in the history of American stocks, wage
gains that are failing to keep up with inflation and
unemployment hovering around 9 percent may be causing Americans
to lose faith that the economy and their financial situations
will soon improve. Applications for unemployment benefits
climbed last week to the highest level in a month.

“The recent market volatility has exacted a toll on consumer
confidence that will likely not ease any time soon,” said Joseph
Brusuelas
, a senior economist at Bloomberg LP in New York.
“Consumer sentiment has reached a critical tipping point that
suggests households may pull back on spending.”

First-time claims for jobless insurance rose by 9,000 to 408,000
in the week ended Aug. 13, Labor Department figures showed
today. Economists surveyed by Bloomberg News projected a rise to
400,000, according to the median forecast.

The cost of living in the U.S. rose in July by the most in four
months, led by gains in food and fuel, the Labor Department also
said. The consumer-price index increased 0.5 percent from June,
while worker pay failed to keep pace. Adjusted for inflation,
hourly wages dropped 0.1 percent in July and were down 1.3
percent from the same month a year ago.

Stocks declined today on concern about the global economy and
that European banks lack sufficient capital. The Standard &
Poor’s 500 Index dropped 3.2 percent to 1,156.12 at 9:39 a.m. in
New York. The gauge has fallen 7.6 percent so far this month
through yesterday. It rose or fell at least 4.4 percent in each
of the first four days of last week, an unprecedented string of
swings of such magnitude in consecutive days, according to data
compiled by Birinyi Associates Inc., Bloomberg and Howard
Silverblatt
, senior index analyst at S&P.

The drop in the Bloomberg economic expectations gauge was most
severe among households earning $50,000 a year or more, married
people and full-time workers, today’s report showed.

“The change from last month stands out among some better- off
groups, another troubling sign,” Gary Langer, president of
Langer Research Associates LLC in New York, which compiles the
index for Bloomberg, said in a statement.

The weekly comfort data showed declines in two of the index’s
three components. The measure of Americans’ views of the current
state of the economy dropped to minus 85.4 last week from minus
85.2 the prior period. The gauge of personal finances fell to
minus 8.4, the lowest level since the first week of July. The
buying climate index rose to minus 51.2, the first increase in
five weeks, from minus 55.

The Bloomberg comfort index, 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 recession ended,
the report showed.

Other reports have shown more volatility in confidence. The
Thomson Reuters/University of Michigan preliminary index of
consumer sentiment for August plunged to the weakest reading
since May 1980, when the economy was contracting at a 7.9
percent annual pace.

Shoppers at Wal-Mart Stores Inc., the world’s largest retailer,
continue to be “strained” by economic conditions, Charles
Holley, chief financial officer at the Bentonville, Arkansas-
based company, said in a conference call with reporters this
week. Consumers’ biggest concern is unemployment, rather than
fuel or food costs, he said.

The jobless rate dropped to 9.1 percent in July as thousands of
discouraged workers left the labor force, figures from the Labor
Department showed earlier this month.

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 monthly expectations gauge reflects the responses of 500
households polled over the past two 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, mwomack4@bloomberg.net