Consumer confidence dropped last week from a two-month high as fewer Americans considered it a good time to spend and their views of the economy languished.
The Bloomberg Consumer Comfort Index decreased to minus 37.5 in the week ended July 1 from minus 36.1 in the previous period. Even with the drop, the measure averaged minus 37.6 in the second quarter, the best showing since the first three months of 2008, helped in part by lower gasoline prices.
Slower job growth and an unemployment rate that’s exceeded 8 percent for 40 straight months is restraining sentiment and making it difficult for spending to pick up. Confidence waned among Americans earning $50,000 a year or more as Europe’s debt crisis took a toll on investments.
“The decline in consumer comfort is consistent with the soft spending data observed over the past two months and does pose a risk to the growth path of the economy,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. It’s “reversing three months of improvement of sentiment among upper-end households that have been the main drivers of the modest pickup in overall household spending in 2012.”
Other data today indicate the U.S. economy is avoiding further deterioration in the labor market.
Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week. Applications for jobless benefits decreased 14,000 in the week ended June 30 to 374,000, the fewest since the middle of May, Labor Department figures showed.
Companies added more workers than forecast in June, according to a report from Roseland, New Jersey-based ADP Employer Services. The 176,000 gain last month followed a 136,000 rise the prior month that was higher than initially estimated.
Stocks dropped as concern over the outlook for global growth outweighed the better labor market data. The Standard & Poor’s 500 Index declined 0.3 percent to 1,370.07 at 9:41 a.m. in New York.
Other measures of confidence have declined as the labor market weakened. The Conference Board’s sentiment reading fell in June to a five-month low, the New York-based group said last week. The Thomson Reuters/University of Michigan’s measure dropped last month to the lowest level this year.
Payrolls climbed by 69,000 in May, less than the most- pessimistic forecast in a Bloomberg survey, after a revised 77,000 gain in April that was smaller than initially estimated, Labor Department figures showed June 1. The jobless rate rose to 8.2 percent from 8.1 percent.
The jobs tally in June probably capped the weakest quarter for employment in more than two years, a Labor Department report tomorrow is projected to show. Employers added 90,000 workers to payrolls, according to the median forecast in a Bloomberg survey.
The Bloomberg index of whether consumers consider it a good time to buy declined to minus 42.4 after minus 40.9 the prior week. The gauge of personal finances fell to 1.8 from 4.4.
The index of the state of the national economy was little changed at minus 71.7 after minus 71.9.
Sentiment for higher-income respondents was negative for the second straight week, while confidence among households earning $50,000 or more was the weakest in a month.
“As a general rule, when the index is negative among better-off Americans, consumer sentiment is in trouble overall,” Gary Langer, president of Langer Research Associates in New York, which compiles the index for Bloomberg, said in a statement.
Cheaper gasoline failed to spur confidence last week. The average cost of a gallon of regular unleaded reached $3.33 a gallon on July 1, down 61 cents from a high this year reached in April, according to AAA, the nation’s largest auto group.
Target Corp. and Macy’s Inc. posted June same-store sales that trailed analysts’ estimates, a report today showed. Purchases at Target, the second-largest U.S. discount chain, rose 2.1 percent, falling short of the average projection for a 2.8 percent gain from analysts surveyed by researcher Retail Metrics Inc. Macy’s, the second-biggest U.S. department-store chain, posted a 1.2 percent increase in same-store sales, missing the 2.3 percent estimate.
“Consumers continue to face difficult economic headwinds,” Howard Levine, chairman and chief executive officer of Matthews, North Carolina-based Family Dollar Stores, Inc., said on a June 28 earnings call. “While consumer expectations for inflation have moderated recently, unemployment rates have given up gains and consumer confidence is deteriorating.”
Today’s figures also showed Democrats registering higher sentiment than Republicans for a record 15th consecutive week, while independents were at their second-lowest reading of the year at minus 46.8.
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old and older. 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 latest reading for the first time included mobile phone and Spanish-language interviews as a transition toward expanding the survey’s reach.
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.
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