U.S. Consumer Confidence Declines to Lowest Since May in Bloomberg Index
Consumer confidence dropped last week to the lowest level since mid-May as American high earners, homeowners and those working full time turned more pessimistic.
The Bloomberg Consumer Comfort Index was minus 49.1 in the period to Aug. 7, down from minus 47.6 the prior week and the second-lowest level in a year. The measure was less than five points away from the record low of minus 54 reached in November 2008, during the depths of the last recession.
The biggest one-week plunge in stocks since 2008 followed by the downgrade of the country’s top credit rating may even be unnerving those who are fully employed and earning more than $100,000 a year. Rising concern among such households, which have the wherewithal to spend, poses a risk to a recovery that Federal Reserve policy makers said this week was already advancing “considerably slower” than projected.
“The recognition by consumers that they will bear the disproportionate burden of costs due to the downgrade, in addition to stock market volatility and another weak employment report, sufficiently increased consumer discomfort,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. The comfort gauge is poised to keep falling in coming weeks, he said.
Claims for jobless benefits unexpectedly fell last week to a four-month low, signaling the recent slowdown in payroll gains is due to a lack of hiring rather than more firings, another report showed today. Applications for unemployment insurance payments decreased 7,000 in the week ended Aug. 6 to 395,000, the fewest since early April, the Labor Department said in Washington.
Stocks rose after benchmark gauges sank yesterday to 11- month lows. The Standard & Poor’s 500 Index climbed 1.6 percent to 1,138.19 at 9:40 a.m. in New York. Treasury securities fell, sending the yield on the 10-year note up to 2.20 percent from 2.11 percent late yesterday.
Sentiment among Americans employed full-time fell to minus 43.6 last week, the lowest point since the recession ended in June 2009. The gauge for people making more than $100,000 declined to minus 21, the weakest since November 2009. The decreases indicate Americans with the means to shop may be hesitant to open their wallets.
Consumer spending dropped in June for the first time in almost two years as savings climbed, Commerce Department figures showed last week. The U.S. economy grew less than forecast in the second quarter after almost stalling at the start of the year, another report from the agency showed.
The comfort index is “a short step away from minus 50, the level historically associated with the deepest depths of recession,” said Gary Langer, president of Langer Research associates LLC in New York, which compiles the index for Bloomberg.
Two of the comfort measure’s three subcomponents declined last week. The gauge of personal finances dropped to its lowest level since the start of July, while the buying climate index decreased to a more than two-month low. Stubbornly high fuel prices may explain the deterioration.
After reaching a three-month low of $3.54 a gallon in late June, the average price of regular gasoline climbed throughout July and averaged $3.69 last week.
Views of Economy
The gauge of Americans’ views of the economy, which is the difference between those with positive versus negative opinions, was minus 85.2 after minus 86.5 the previous week. Some 52 percent of respondents said the economy is in poor shape, the largest share in 16 months.
The S&P 500’s 7.2 percent slump last week was the biggest since November 2008, which may explain why sentiment decreased among those with the highest incomes. Weekly changes in the overall comfort gauge have moved in the same direction as the Dow Jones Industrial Average about 80 percent of the time since the measure’s inception in 1985, according to Langer.
Today’s comfort report also showed sentiment among Democrats dropped to the lowest level since March 2010, a possible concern for President Barack Obama as he seeks re- election next year. Confidence among Republicans fell to a 12- week low.
The turmoil in financial markets may be hurting General Motors Co. (GM), the biggest U.S. automaker. GM this week said its forecast for 2011 U.S. sales may be in jeopardy.
“Consumer confidence is pretty fragile right now,” Don Johnson, GM’s vice president of U.S. sales, said in a presentation. “With the recent volatility in the stock market, we know that’s a concern we really have to watch closely.”
The Bloomberg comfort index, which began in December 1985, has averaged minus 45.0 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 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.
To contact the editor responsible for this story: Christopher Wellisz at email@example.com
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.