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U.S. Consumer Confidence Drops on Concern over Economy

July 28, 2011

Press Release

The Bloomberg Consumer Comfort Index Was Minus 46.8 in the
Period to July 24

New York — Consumer confidence dropped last week as Americans’
views of the economy plunged to the lowest level since the
recession.

The Bloomberg Consumer Comfort Index was minus 46.8 in the
period to July 24, the lowest since May, compared with minus
43.3 the prior week. Six percent of those surveyed said the
economy was in good shape, the fewest since April 2009.

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

Seniors and the unemployed were among those showing the most
negative readings, a sign that partisan wrangling over the
nation’s budget deficit was jarring those likely to be affected
by cuts in spending. Unemployment above 9 percent, falling home
prices and a rebound in gasoline costs may be weighing on
sentiment overall, posing a risk for consumer spending.

“Given the combustible combination of weak economic data and the
policy standoff between Democrats and Republicans, conditions
are ripe for consumer sentiment to breach the 2011 low,” said
Joseph Brusuelas, a senior economist at Bloomberg LP in New
York. “The high probability of a downgrade to the credit rating
of the U.S. is likely to exacerbate the general sour mood of the
public over the next several months.”

The comfort gauge reached a nine-month low of minus 49.4 in May
after the price of regular gasoline climbed to $3.99 a gallon.

Another report today indicated weakness in the labor market may
be starting to abate. Applications for unemployment insurance
payments declined 24,000 in the week ended July 23 to 398,000,
the fewest since April. Economists forecast a drop to 415,000
claims, according to the median estimate in a Bloomberg News
survey.

Stocks were little changed as concern about the outcome of debt-
ceiling negotiations offset the drop in jobless claims. The
Standard & Poor’s 500 Index was at 1,304.58 at 9:40 a.m. in New
York
, down less than 0.1 percent from yesterday’s close.
Treasury securities rose, sending the yield on the benchmark 10-
year note down to 2.95 percent from 2.98 percent late yesterday.

All three of the index’s subcomponents fell last week. The gauge
of Americans’ views of the economy, which is the difference
between those with positive versus negative opinions, sank to
minus 88.1 from minus 83.7 the prior week.

The measure of personal finances retreated from a more than two-
year high, while the buying climate index fell to the lowest
level since early June.

The report “may well reflect frustration with the debt debate in
Washington, with a variety of polls showing broad public concern
about the economic impact of a default if it were to occur,”
Gary Langer, president of Langer Research Associates LLC in New
York, which compiles the index for Bloomberg, said in a
statement.

Party leaders are readying dueling proposals to cut the
government’s budget deficit and raise the debt ceiling by Aug.
2, the date the Treasury Department says the U.S. will lose its
borrowing authority.

Confidence deteriorated in six of the seven income categories,
including households making more than $100,000, today’s report
showed, indicating few were spared from the growing concern with
the debt talks.

The measure of confidence for consumers 65 and older fell to
minus 55.2, the lowest level since at least October 2009, when
it was at minus 55 and the data were rounded.

Sentiment among women dropped last week to the lowest level
since March and that of the unemployed fell to the second-
weakest point of the year. It also decreased among Democrats and
Independents and improved among Republicans.

The Bloomberg comfort index, which began 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 preliminary
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.

A housing market that’s struggling to improve could be
contributing to consumers’ pessimism. Home prices in 20 U.S.
cities fell in the year ended May by the most in 18 months, the
S&P/Case-Shiller index of property values showed earlier this
week. Sales of new U.S. homes also dropped in June for a second
straight month, the Commerce Department reported.

Unemployment hovering above 9 percent is keeping consumers out
of stores, said Scott Davis chief executive officer of United
Parcel Service Inc. (UPS)

“We have to get unemployment rates down in this country to get
consumer confidence up,” Davis said on a July 26 conference call
with analysts. “What we’re seeing here is a lack of consumer
confidence. They’re not buying goods.”

UPS officials projected a “fairly slow” third quarter for the
world’s largest package-delivery company.

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, mwomack4@bloomberg.net