Consumer confidence in the U.S. dropped last week by the most in more than a year as perceptions of personal finances and the buying climate dimmed.
The Bloomberg Consumer Comfort Index fell to minus 35.8 in the period to April 22 from minus 31.4 the previous week, the biggest decline since March 2011. A gauge of the buying climate decreased to a two-month low, and a measure of household financial wherewithal fell by the most since September.
Payrolls grew in March by the least in five months, raising concern that growth is short of the pace needed to trim an unemployment rate hovering above 8 percent. Bigger advances in jobs and incomes would provide a cushion against elevated fuel costs and allow households to accelerate spending, which accounts for about 70 percent of the economy.
“It is going to be difficult to generate large improvements in sentiment unless the economy begins to pick up,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Jobs are growing, but not fast enough. There’s a risk the pace of consumption will slow this quarter.”
Even with the latest decline, the comfort index is now in its 11th consecutive week above the minus 40 level, its most sustained breakout since sentiment soured in early 2008. The index has averaged minus 15.3 since its inception in December 1985.
Another report from the Labor Department today showed improvement in the labor market may be fading as more Americans than projected filed applications for unemployment benefits. First-time jobless claims decreased to 388,000 last week from a revised 389,000 the prior period, which was the highest since early January. The median estimate of economists in a Bloomberg News survey called for claims to fall to 375,000.
Stocks declined after the jobs figures and as earnings from United Parcel Service Inc. and Exxon Mobil Corp. missed estimates. The Standard & Poor’s 500 (SPX) Index fell 0.2 percent to 1,388.42 at 9:35 a.m. in New York.
An index of the buying climate decreased to minus 41.5 last week from minus 36.8 the prior week, today’s comfort report showed. A measure of Americans’ views of the state of the economy dropped to minus 66.4 from minus 64.3, and a gauge of personal finances slid to 0.4 from 6.8 the prior week.
Gross domestic product climbed at a 2.5 percent annual rate in the first quarter, after a 3 percent advance in the final three months of 2011, according to the median forecast of economists surveyed by Bloomberg News ahead of a Commerce Department report tomorrow. Consumer spending may have posted the biggest gain in a year, they predicted.
Federal Reserve policy makers yesterday said they expect growth to gradually accelerate, and refrained from new actions to lower borrowing costs. The central bankers repeated their view that interest rates will probably remain “exceptionally low” at least through late 2014.
The consumer comfort data signal that other measures will fail to rebound after easing this month. The Conference Board’s confidence index was at 69.2 in April, little changed from a revised 69.5 the prior month. The Thomson Reuters/University of Michigan preliminary gauge of consumer sentiment cooled this month from a one-year high.
Uneven progress in the labor market may be weighing on moods. Employers added 120,000 jobs in March, the fewest in five months and half the 240,000 gain in February. Nonetheless, payrolls have risen by 1.13 million workers over the past six months, and the jobless rate dropped in March to 8.2 percent, the lowest since January 2009.
Men and young Americans, those from 18 to 34 years old, showed the biggest declines in sentiment during the latest week. The gauge for men declined after reaching a four-year high the prior week. Sentiment among the young fell last week to the lowest level since January.
Among independents, a key swing group during this year’s presidential election, the comfort gauge fell to a two-month low of minus 37.7 from 29 the prior week, today’s report showed. The measure also worsened for Democrats while holding at the prior week’s level for Republicans.
Confidence dwindled for seven of the eight income groups in the comfort survey, the report showed.
By contrast, Americans working part time were the most optimistic in four years, a sign of rising expectations that more full-time work will become available.
Companies citing rising demand include Harley-Davidson Inc. (HOG), the biggest U.S. motorcycle maker. The company raised its production forecast as marketing efforts pay off among young adults and women customers. Harley expects to ship 245,000 to 250,000 motorcycles this year, up from a January forecast of as many as 245,000, as bikes like the $7,999 Super Low and the Forty-Eight, starting at $10,499, are winning new riders.
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old 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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