Consumer Confidence in U.S. Improves on Fuel Prices, Bloomberg Index Shows
Consumer confidence rose last week for the third consecutive time as lower gasoline prices lifted Americans’ outlook on their finances.
The Bloomberg Consumer Comfort Index climbed to minus 45.9 in the period to June 5, the best showing since the end of April, from the prior week’s minus 47.1. Across income groups, sentiment improved the most among those making less than $50,000 a year.
A 26-cent drop in the average cost of a gallon of gasoline at the pump, from the almost three-year high of $3.99 reached on May 4, is giving consumers a little extra cash to spend on other goods and services. At the same time, unemployment at 9.1 percent and slowing job growth will weigh on households, threatening to block any additional improvement in sentiment.
Cheaper gasoline “has lifted sentiment temporarily off the mat,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Even so, “confidence, like the U.S. economy, remains stuck in second gear. The slowdown in private-sector hiring and increase in the unemployment rate poses a potent risk to consumer confidence heading into the second half of 2011.”
Other reports today showed the trade deficit unexpectedly narrowed in April and claims for unemployment benefits increased last week.
The trade gap shrank 6.7 percent to $43.7 billion, the lowest since December, according to Commerce Department figures. Purchases of goods from Japan dropped by a record $3 billion in the aftermath of the earthquake and tsunami.
Jobless claims increased by 1,000 to 427,000, a Labor Department report showed. Economists surveyed by Bloomberg News projected a drop in claims to 419,000, according to the median forecast.
The comfort report’s gauge of personal finances rose to minus 8.5 last week, the best reading in a month, from minus 13.4 the prior week. The 4.9-point gain was the biggest since February.
The measure of Americans’ views of the economy was minus 75.5 last week, compared with minus 74.6 the previous week. Another component of the comfort index, the buying climate, was little changed at minus 53.8 after minus 53.1.
Payrolls grew at the slowest pace in eight months in May, and the unemployment rate unexpectedly climbed from 9 percent in April, Labor Department figures showed on June 3. The 54,000 increase in employment was smaller than the lowest estimate of 89 economists surveyed by Bloomberg News and followed a 232,000 gain in April.
“The economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers,” Federal Reserve Chairman Ben S. Bernanke said in a June 7 speech in Atlanta.
Sentiment among households earning more than $100,000 a year fell to a two-month low of minus 9.6, negative for a fourth straight week and below its 2010 and 2011 averages, today’s report showed. The 6.2 percent drop in the Standard & Poor’s 500 Index since the end of April may be unnerving higher-income consumers.
For less well-off Americans, cheaper fuel bills may have been more of an influence on comfort. Confidence rose for all four income brackets of households making less than $50,000 a year, led by a 6-point gain among those earning $40,000 to $49,900.
The average price of a gallon of regular gasoline dropped to $3.73 yesterday, down from the May 4 price that was the highest since July 2008, according to AAA, the nation’s largest auto club.
The report showed sentiment among part-time workers dropped to a four-month low of minus 59.2 from minus 51.9 as 66 percent rated their finances negatively. Such ratings put part-time workers more in synch with unemployed Americans than with those who have full-time work, the report said.
The pessimism among part-timers is “underscoring Bernanke’s comment on the pain not only of unemployment, but of underemployment, in today’s still-struggling economy,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.
Hooker Furniture Corp. (HOFT), a Martinsville, Virginia-based furniture maker, is among companies concerned that the spate of weak economic data may trim spending.
“Recent negative news on housing, employment and consumer confidence gives us reason for concern as we enter a traditionally weak season for furniture purchases,” Paul Toms, Hooker’s chairman and chief executive officer, said on a conference call with investors yesterday. “While business isn’t robust, we are holding our own and faring better than retail in general.”
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.
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