U.S. Consumer Confidence Drops on Concern over Economy
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.
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