U.S. Consumer Confidence Stabilizes Near Record Low, Bloomberg Index Shows
Consumer confidence stabilized last week at a level that’s within striking distance of an all-time low as Americans remained pessimistic about the economy.
The Bloomberg Consumer Comfort Index was minus 47 in the week to Aug. 21 compared with minus 48.3 reading the previous period that halted a three-week slide. The gain was within the survey’s 3-point margin of error. The figure is close to minus 54 in January 2009, which matched the worst reading in the history of the series dating back to 1985.
Confidence among those earning more than $100,000 a year fell in the past month to the lowest level since 2009, possibly due to stock market weakness and mounting concern the recovery may falter. Unemployment above 9 percent has also soured consumers’ moods, posing a risk of further erosion of household spending that accounts for 70 percent of the economy.
“The consumer sector remains historically weak, which is one reason why investors are likely to not find much comfort in the modest improvement in sentiment,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
Another report today showed first-time applications for jobless benefits increased by 5,000 to 417,000 in the week ended Aug. 20, according to the Labor Department. Claims were pushed up by a labor dispute at Verizon Communications Inc.
Stocks dropped worldwide, snapping a three-day rally for the Standard & Poor’s 500 Index. The S&P 500 fell 1.6 percent to 1,159.27 at the 4 p.m. close in New York.
Even after last week’s gain in confidence, the Bloomberg comfort index has been stuck below minus 40, the level associated with recessions or their aftermath, since the end of February.
“The slim good news is that the slide has halted,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “The bad is that the index nonetheless remains in a dreadful state.”
The gauge, which began December 1985, has averaged minus 45.1 this year, compared with minus 45.7 for all of 2010 and minus 47.9 in 2009, the year the last recession ended, the report showed.
The comfort survey showed improvement in two of the three subcomponents. The index of Americans’ views of the economy rose to minus 84.3 last week from minus 85.4. The gauge of personal finances climbed to minus 4.5 after a minus 8.4 reading in the prior period. A measure of the buying climate dropped to minus 52.4 from minus 51.2.
Confidence among households with annual income exceeding $100,000 fell last week to minus 19, and the average over the past month was the lowest since 2009. For those making less than $15,000 a year, the comfort index dropped to minus 80.9, the worst reading in a year.
Sentiment among Americans with college educations dropped to minus 40.6, the weakest level since April 2010.
Democrats are also feeling more downbeat as their confidence gauge fell to minus 55, the lowest reading since March 2010. Sentiment among Republicans improved to minus 44.4, widening the gap between the two parties to 10.6 points, the most since March. Political independents’ confidence rose to minus 42.8, the best reading since April.
In the past month, confidence “has slid by 15 points among Democrats but held essentially steady among Republicans, perhaps signaling a shift in trajectories -- one worth watching in the 2012 election season,” Langer said in the statement.
Other measures of sentiment are equally gloomy. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment plunged in August to a three-decade low.
Consumers’ reluctance to spend is hurting results at retailers. American Eagle Outfitters Inc. (AEO), a Pittsburgh-based teen apparel chain, yesterday reduced its full-year profit forecast, citing higher costs for cotton and “tempered” sales expectations for the second half of the year.
“The lack of an economic recovery has created a persistently challenging retail environment,” James O’Donnell, chief executive officer, said on a conference call.
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.
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