U.S. Consumer Comfort Falls as Gas Prices Climb

Consumer confidence in the U.S. pulled back last week after reaching a six-month high, a sign rising gasoline prices may be countering the benefits of an improving job market.

The Bloomberg Consumer Comfort Index (COMFCOMF) declined to minus 47.4 in the period ended Jan. 15 from a reading of minus 44.7 the prior week. The monthly expectations gauge dropped to minus 19 for January from December’s seven-month high of minus 17.

An almost 20-cent per gallon increase in gasoline costs over the past month may be starting to sting households faced with limited wage gains, falling real estate values and post- holiday bills. At the same time, the lowest unemployment rate in almost three years and sustained job gains may give Americans reason to be more upbeat in coming months.

“Consumer sentiment is particularly sensitive to shifts in the price of gasoline,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Consumer balance sheets remain stressed due to lackluster wage growth, despite a modest improvement in the labor market.”

Jobless claims plunged by 50,000 to 352,000 last week, the lowest level since April 2008, the Labor Department reported today. The decline was the biggest since September 2005, when claims first surged then slumped in the aftermath of Hurricane Katrina.

Last week’s decline reflected normal seasonal volatility during this time of year, a Labor Department spokesman said as the data was released.

The decrease helped push up stocks. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,310.31 at 9:41 a.m. in New York.

Consumer Prices

The cost of living was little changed in December for a second month, the Labor Department also reported today. The unchanged reading in the consumer-price index was less than the 0.1 percent gain median forecast of economists surveyed by Bloomberg News. Costs excluding food and energy rose 0.1 percent last month as projected.

The Commerce Department said builders began work on fewer homes in December, reflecting a slump in construction of multifamily units. Home starts dropped 4.1 percent to a 657,000 annual rate.

All three components of the weekly comfort index declined, today’s report showed. The measure of Americans’ views of the current state of the economy fell to minus 82.5 last week from minus 82.1 in the prior period, and the buying climate index decreased to minus 52.2 from minus 49.4. The gauge of personal finances dropped to minus 7.5 from minus 2.6.

Dimmer Outlook

In a separate forward-looking question, 19 percent of Americans this month said the economy is getting better and 38 percent said it is getting worse. Men and Republicans (COMFREP) were among groups with the dimmest outlooks, while households in the Northeast were among the most optimistic.

Data in recent weeks showed the economy strengthened at the end of last year and into 2012, easing concern that the European debt crisis will cause the U.S. to falter.

The unemployment rate unexpectedly fell last month to 8.5 percent, the lowest since February 2009, Labor Department figures showed earlier this month. The world’s largest economy increased payrolls by 200,000 in December, twice as much as the previous month, the agency also said.

Confidence among Americans earning more than $100,000 a year is making headway. Their comfort index of minus 0.2 last week was the highest since May.

Gasoline Prices

“The question from these data is whether the better-off boat floats into positive territory -- and whether the rest of Americans find cause to follow,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “Gasoline prices are a major concern. Their run-up early last year quickly cut short a would-be rally in confidence.”

The average price of regular unleaded gasoline at the pump was $3.39 a gallon Jan. 12 and 13, up from a 10-month low of $3.20 reached on Dec. 20, according to AAA, the biggest U.S. auto group. The last time fuel costs climbed as much in a similar period was in April.

Confidence among registered Democrats (COMFDEM) fell last week to the lowest level in four months, while the measure for political independents climbed to the highest since April.

Last week’s erosion in confidence may be the first sign that other measures have temporarily peaked. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed in January to the highest level in eight months. The Conference Board’s index of confidence in December also rose to an eight-month high.

Number of Respondents

The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers at least 18 years old. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses for each measure is subtracted from the share of positive views. The results are then summed and divided by three. The most recent reading is based on the average of responses over the previous four weeks.

The comfort index, which began in December 1985, averaged minus 46.8 last year, compared with minus 45.7 for all of 2010 and minus 47.9 in 2009, the worst full-year reading on record, the report showed.

“We had wobbly confidence throughout 2011,” Ellen Hughes- Cromwick, chief economist at Ford Motor Co., said on a Jan. 4 conference call. “We need to see an uptick in the labor market and better job creation. That will fundamentally feed into improved confidence.”

The Bloomberg 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: Timothy R. Homan in Washington at thoman1@bloomberg.net

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

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Consumer Comfort in U.S. Retreats

David Paul Morris/Bloomberg

Gasoline drips from the nozzle of a gasoline pump at a Shell gas station, operated by Royal Dutch Shell Plc., in San Francisco.

Gasoline drips from the nozzle of a gasoline pump at a Shell gas station, operated by Royal Dutch Shell Plc., in San Francisco. Photographer: David Paul Morris/Bloomberg

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Jan. 19 (Bloomberg) -- U.S. initial jobless claims plunged by 50,000 to 352,000 in the week ended Jan. 14, fewer than forecast and the lowest level since April 2008, Labor Department figures showed today. Meanwhile, housing starts dropped 4.1 percent to a 657,000 annual rate last month, reflecting a slump in multifamily dwellings, according to the Commerce Department. Sara Eisen and Betty Liu report on Bloomberg Television's "In the Loop." (Source: Bloomberg)