Consumer confidence plunged last week to the lowest level since August as rising gasoline prices made Americans more pessimistic about the economic outlook and their finances.
The Bloomberg Consumer Comfort Index dropped to minus 48.5 in the period to March 13 from minus 44.5 the prior week. Sentiment fell across most income and age groups and worsened for all education levels.
Higher gasoline prices persisted for another week, becoming a bigger concern for Americans already dealing with rising grocery bills. The report showed confidence among households with annual incomes exceeding $100,000 fell to the lowest level since November, posing a risk for consumer spending, the biggest part of the economy.
The report “shows further evidence of the mounting concerns that the U.S. consumer has about the outlook, with oil prices the main factor crimping their optimism,” said David Semmens, a U.S. economist at Standard Chartered Bank in New York. “Any weakness in the U.S. consumer creates significant concern.”
Other reports today showed that the cost of living climbed more than forecast last month, driven by prices of food and fuel, while manufacturing expanded and an index of U.S. leading economic indicators rose.
Stocks rallied, halting the biggest three-day drop in the Standard & Poor’s 500 Index since August, as Japan moved closer to restoring power at a nuclear plant and FedEx Corp. boosted its profit forecast. The S&P 500 climbed 1.3 percent to close at 1,273.72 in New York.
Began in 1985
The Bloomberg comfort index, which began December 1985, fell to a record low of minus 54 in November 2008, while the peak of 38 was reached in January 2000. Readings averaged minus 45.7 last year.
The latest results for the comfort index reflected worsening results for all three subcomponents.
A gauge of Americans’ views of the economy fell to minus 80.3 last week, the lowest level since November, from minus 76.8 the prior week. The share of households with a positive view of the economy dropped to 10 percent from 12 percent.
The measure of personal finances swung to minus 7.7 last week, from minus 3.7, the report showed. Forty-six percent of those polled held positive views on their financial situation, down from 48 percent the previous week.
An index of the buying climate fell to minus 57.4, the lowest since October 2009, from minus 53. Those saying it was a good time to buy needed items dropped to 21 percent from 24 percent the previous week.
Today’s report showed the improvement in the labor market is doing little to lift consumers’ moods. The index for Americans with full-time jobs fell to minus 35.4 last week, the lowest level since October, while it worsened for those who were unemployed.
Initial claims for unemployment benefits fell for a third week in the last four, according to a Labor Department report today. Applications decreased by 16,000 to 385,000 in the week ended March 12. The four-week average of claims dropped to the lowest level since July 2008.
The average price of regular gasoline at the pump climbed another 5 cents to $3.56 a gallon in the week ended March 13, according to AAA, the nation’s biggest motoring organization. That followed a gain of 14 cents the prior week and 20 cents a week before that.
The report is “showing trouble across the board,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “While global disruption from the crisis in Japan to the unrest in the Middle East can’t help, the most likely proximate cause is the price of gasoline.”
Looking for Bargains
Gas prices are going to continue to challenge people,” William Simon, chief executive officer of U.S. operations for Bentonville, Arkansas-based Wal-Mart Stores Inc. (WMT), said on a conference call with investors on March 10. “As gas prices go up, it costs more to fill up your tank, and they’re looking for bargains.”
Gasoline prices and the comfort index have shown a strong inverse correlation since 2004, according to calculations by Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Additionally, changes in the four-week average of claims for jobless benefits have been in sync with the comfort gauge about 72 percent of the time.
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.
The responses are broken down by participants’ sex, age, income level, race, region of residence, political affiliation, marital and employment status.
Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania.
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