U.S. Consumer Confidence Falls on Higher Gas Prices, Bloomberg Index Shows

Consumer confidence in the U.S. fell last week for the first time in a month as rising gasoline prices caused households to worry about their finances.

The Bloomberg Consumer Comfort Index decreased to minus 45.1 in the period ended April 24, the lowest level since the end of March, from minus 42.6 the prior week. Measures of personal finances and buying climate dropped.

Another report today showed consumer spending climbed more than forecast in the first quarter, indicating that more jobs and rising incomes are helping Americans cope with the jump in fuel costs. To spur the economy, Federal Reserve Chairman Ben S. Bernanke signaled yesterday policy makers will maintain record monetary stimulus after ending large-scale bond purchases in June.

“Job growth boosts overall income growth, and that’s certainly a key part supporting consumption,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York. “The risk, though, is that higher gasoline prices squeeze disposable income.”

The personal finances gauge dropped to minus 9.2 last week, the lowest since Feb. 13, from minus 0.3, the report showed. Forty-five percent of those polled held positive views on their financial situation, down from 50 percent the previous week.

The buying-climate index decreased to minus 51.8 from minus 49.2. Those people saying it was a good time to buy needed items fell a point to 24 percent.

View of Economy

Consumers’ economic outlook turned more optimistic. A gauge of Americans’ views of the economy rose to minus 74.3 last week from minus 78.2 the prior week. The share of households with a positive view of the economy increased to 13 percent.

Other reports today showed the economy grew at a slower pace in the first three months of the year, and claims for jobless benefits unexpectedly jumped last week.

The economy grew at a 1.8 percent annual rate last quarter, down from a 3.1 percent pace in the fourth quarter, as government spending dropped by the most in 28 years, according to figures from the Commerce Department.

Jobless claims increased by 25,000 to 429,000 in the week ended April 23, the most since late January, Labor Department figures showed. The government anticipates a drop in unadjusted applications during the Good Friday holiday week, something that didn’t happen this year, a Labor Department spokesman said.

Treasuries Climb

Stocks were little changed after the reports and Treasury securities rose. The Standard & Poor’s 500 Index was at 1,355.65 at 10:37 a.m. in New York. The yield on the benchmark 10-year Treasury note, which moves inversely to prices, fell to 3.31 percent from 3.36 percent late yesterday.

Among households with incomes greater than $100,000, confidence rose to 1.3, the highest since the end of February, from minus 3.2 in the prior week, the consumer comfort report showed. Those will full-time jobs also grew more confident, as well.

Confidence among single people worsened. Thirty-three percent of singles said their finances are in good shape, down 14 points from the previous survey. Among 18- to 34-year-olds, 41 percent are optimistic about their financial situation, down 13 points.

“Record-breaking gasoline prices are primarily to blame,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “Positive ratings of personal finances fell most sharply among some of the lower-income groups hardest hit by higher gasoline prices.”

Consumer Spending

Household purchases, which account for about 70 percent of the economy, rose at a 2.7 percent annual rate in the first quarter compared with a 4 percent pace in the final three months of 2010, the Commerce Department figures showed today. The Bloomberg Comfort Index, with records dating back to 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, and readings below minus 40 coincide with a recession.

Consumers are grappling with higher prices for fuel and food as wages fall after adjusting for inflation. The average price of a gallon of gasoline was $3.89 on April 27, the highest in more than two years.

Meanwhile, average hourly earnings in the U.S. adjusted for inflation shrank 1 percent in the 12 months ended in March.

‘Challenging’ Prices

Huntington Beach, California-based BJ’s Restaurants Inc. (BJRI), which operates its namesake brewery, pizza and grill chains, will find maintaining this year’s “solid” sales will be “significantly more challenging” because of rising prices, Chief Financial Officer Gregory S. Levin said in an April 20 conference call with analysts.

“While the environment does appear to be stabilizing, consumers today are facing higher gas and energy prices as well as higher food costs,” Levin said. “As a result these inflationary pressures may temper restaurant sales in general in the future.”

Still, Fed policy makers said yesterday after a two-day meeting in Washington that the economy is recovering at a “moderate pace” and the pickup in inflation is likely to be temporary, as they agreed to finish $600 billion of bond purchases on schedule in June.

Fed Forecasts

Following the meeting, central bank officials boosted their forecast for inflation, saying that a measure of prices will rise between 2.1 percent and 2.8 percent this year, compared with the 1.3 percent to 1.7 percent rate estimated in January. The Fed said it expects “these effects to be transitory.”

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.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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