Consumer Comfort in U.S. Declines to Lowest Level in Two Months

Consumer confidence dropped last week to a two-month low as more Americans grew concerned about their personal finances.

The Bloomberg Consumer Comfort Index fell to minus 37.6 in the week ended April 29 from minus 35.8, surrendering gains that had lifted it to a four-year high last month. Views on finances sank to the lowest point since January and more households said it was a bad time to buy needed items.

A downshift in hiring and economic growth may be casting doubt on Americans’ ability to sustain spending after purchases grew last quarter at the fastest pace in more than a year. The drop in confidence indicates the run-up in gasoline prices since the start of the year may be starting to pinch even as the cost of fuel has retreated from a 10-month high.

“The reversal of gains in confidence has been particularly pronounced in middle-income groups that are likely caught between sluggish wage increases and rising inflation that has eroded their real purchasing power,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. The deterioration “does not bode well for household consumption.”

The comfort index has averaged minus 15.3 since its inception in December 1985. Even with the latest decline, the gauge is in its 12th consecutive week above minus 40, the most sustained breakout since sentiment soured in early 2008.

The decrease over the past two weeks doesn’t bode well for other measures of confidence that also had been climbing. The Thomson Reuters/University of Michigan’s index of sentiment increased to 76.4 in April, the highest level in a year.

Claims Drop

Fewer Americans than forecast filed applications for unemployment benefits last week, easing concern the job market was taking a turn for the worse, Labor Department data showed today.

Jobless claims fell by 27,000 to 365,000 in the week ended April 28, a one-month low, from a revised 392,000 the prior period. The median forecast of 46 economists surveyed by Bloomberg News called for 379,000 applications.

Stocks were little changed as the drop in claims tempered concern about Europe’s economic outlook. The Standard & Poor’s 500 Index decreased 0.1 percent to, 1,400.85 at 9:40 a.m. in New York.

Two of the three components of the comfort index declined last week. The gauge of personal finances fell to minus 6.6 from 0.4 the week before, and a measure of the buying climate fell to minus 42 from minus 41.5.

While Americans remained pessimistic about the overall economy, their views did improve with the index rising to minus 64.3 from minus 66.4.

Economy Cools

The world’s largest economy expanded at a 2.2 percent annual rate in the first quarter, slower than the 3 percent pace at the end of 2011, the Commerce Department reported last week. The growth was led by the biggest gain in consumer spending since the last three months of 2010.

Visa Inc. (V), the biggest payments network, said yesterday that fiscal second-quarter profit surged 47 percent as customer spending on credit and debit cards rose. The company boosted its profit outlook.

“Visa’s business continues to expand at a healthy pace,” Chairman and Chief Executive Officer Joseph W. Saunders said in a statement.

Confidence among upper-income Americans has been climbing, bucking the recent trend among all groups. The sentiment gauge for households making more than $50,000 a year rose last week to the highest level since January 2008. Those with incomes greater than $100,000 were the only ones in a positive frame of mind with a reading of 7.6, up from 3.7.

Employment Gains

Slowing progress in the labor market might be weighing on moods. Employers added 120,000 jobs in March, the fewest in five months and half the 240,000 gain in February.

Tomorrow, the government will release jobs data for April, a report that is projected to show payrolls increased by about 160,000 and the jobless rate held at 8.2 percent, according to a median forecast in a Bloomberg News survey of economists. The numbers have raised concern that the job market is cooling, mimicking a slowdown in early 2011.

Confidence measures for registered Democrats and independents have dropped the most over the past two weeks after both reached the highest levels in more than four years.

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.

Langer Research Associates LLC in New York compiles the index for Bloomberg. Field work is done by SSRS/Social Science Research Solutions in Media, Pennsylvania.

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

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

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