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U.S. Consumer Comfort Drops to Nine-Month Low as Finances Sour

May 19, 2011

Press Release

The Bloomberg Consumer Comfort Index Was Minus 49.4 in the
Period to May 15

New York — Consumer confidence fell last week to the lowest
level in nine months as the cost of fuel pinched U.S. household
budgets.

The Bloomberg Consumer Comfort Index declined to minus 49.4 in
the period to May 15, the worst reading since August, from the
prior week’s minus 46.9. A gauge of personal finances plunged to
the weakest level since October 2009, and a monthly measure of
economic expectations held at a seven-month low.

Gasoline prices hovering close to $4 a gallon and rising grocery
bills mean fewer dollars for Americans to spend on less
necessary items. Retailers like Wal-Mart Stores Inc. are among
those seeing sales drop as energy prices climb, pointing to a
slowdown in consumer purchases, which account for about 70
percent of the economy.

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

“A persistent pessimism has settled in among the American
public, suggesting a rough second quarter for the U.S. consumer
and economy,” said Joseph Brusuelas, a senior economist at
Bloomberg LP in New York. “Stagnant wages and an elevated level
of unemployment are the probable causes behind the bleak view of
the state of the national economy and household finance.”

Another report today showed fewer Americans than forecast filed
applications for unemployment benefits last week, making it more
likely that the April surge in applications was caused by
temporary events rather than deterioration in the labor market.

Jobless claims declined by 29,000 to 409,000 in the week ended
May 14, the fewest in a month, Labor Department figures showed.
The median estimate of economists in a Bloomberg News survey
called for a drop to 420,000.

Stocks rose on the improvement in claims. The Standard & Poor’s
500 Index climbed 0.2 percent to 1,343.9 at 9:40 a.m. in New
York
. Treasury securities fell, pushing the yield on the
benchmark 10-year note up to 3.23 percent from 3.18 percent late
yesterday.

Each of the three components of the Bloomberg comfort index–
personal finances, buying conditions and economic conditions–
dropped last week, the report showed.

The personal-finances gauge fell to minus 16.5 from minus 10.6
the previous week. A gauge of Americans’ views of the economy,
at minus 75.6, was little changed from minus 75 the previous
week, and the buying-climate index was at minus 56.1, a two-
month low.

“Blame gasoline prices,” Gary Langer, president of Langer
Research Associates LLC in New York, which compiles the index
for Bloomberg, said in a statement. “Consumer sentiment suffers
when gas rises steeply for an extended period.”

Bloomberg’s gauge of economic expectations, issued once a month,
held at minus 16, the lowest since September. The measure is in
line with a component of the Thomson Reuters/University of
Michigan sentiment index, which also showed no deterioration in
Americans’ economic outlook even as their assessment of current
conditions flagged.

This is the first time since January that the measure of the
economic outlook hasn’t weakened, said Langer, citing it as one
of the “glimmers” of hope in the report.

The comfort index for consumers in the West fell to the lowest
level since record-keeping began in 1990. Gasoline prices in the
region were about $4.12 a gallon last week, compared with the
national average of $3.97 during the same period.

Sentiment among younger adults decreased to the lowest in almost
two years, the report showed. Confidence among those who
identify themselves as Independent, neither Democrat nor
Republican, dropped to the lowest level since October 2009.

The comfort index was higher for Democrats than for Republicans
for a fifth straight week, which has happened just once before,
in late 1996. The index for Republicans was minus 46.7, little
changed from minus 46.8 a week earlier. The gauge for Democrats
was minus 43.7, down from minus 38.9.

Wal-Mart, the world’s largest retailer, this week said profit
grew 3.8 percent in the first quarter from the same time last
year as sales abroad made up for declining U.S. demand.

Sales at U.S. Wal-Mart stores open at least a year dropped 1.1
percent, the eighth decline in a row. Customers are still
struggling with economic uncertainty, buying more generic items
rather than their more costly name-brand counterparts,
executives said in a May 17 pre-recorded call.

Customers are making fewer trips to stores because of the
increase in fuel prices, U.S. stores chief Bill Simon said on
the 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 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

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