Consumer Comfort in U.S. Slumps to Lowest Level Since January

Consumer confidence in the U.S. fell last week to the lowest level since January as Americans’ held more pessimistic views on their finances.

The Bloomberg Consumer Comfort Index decreased to minus 47.4 in the period ended Aug. 19, the sixth consecutive drop, from a minus 44.4 the prior period. The series of declines is the longest since 2008, when the U.S. was in recession.

Higher gasoline prices are taking a bigger chunk out of Americans’ paychecks, and an increase in food prices caused by a drought in parts of the country may further hurt finances. In addition, job growth hasn’t proceeded fast enough to bring the unemployment rate below 8 percent, indicating incomes may fail to keep pace with escalating expenses.

“Rising food and gas prices have stoked a bout of discomfort among a broad section of the American public,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The pain has been especially evident down the income ladder in households that will bear the disproportionate burden of adjustment to higher prices. The result will likely be a net slowing in discretionary spending.”

Readings below minus 40 put the comfort gauge “in the zone associated with deep economic discontent,” according to Gary Langer, president of New York-based Langer Research Associates, which compiles the index for Bloomberg. The index has lost 16 points since peaking this year in April.

A Labor Department report today showed the number of Americans filing first-time claims for unemployment benefits climbed last week to a one-month high. Jobless claims rose by 4,000 to 372,000 in the period ended Aug. 18.

Stocks fell amid speculation whether central banks will ease monetary policy further and European leaders will be able to solve the region’s debt crisis. The Standard & Poor’s 500 Index dropped 0.4 percent to 1,408.48 at 9:39 a.m. in New York.

Index Components

All three of the Bloomberg index’s components deteriorated last week. The gauge of Americans’ views on the current state of the economy fell to minus 77.3 last week from minus 75.6 in the prior period, and the buying-climate index declined to minus 48.9 from minus 46.4, both the weakest since January.

A barometer of personal finances slid for a fourth week, to minus 15.9, the lowest since November, from minus 11.1. About six of every 10 respondents said their finances were in bad shape.

The comfort index has been painting a picture that’s different from other indicators of consumer health. The Thomson Reuters/University of Michigan sentiment index rose last week to the highest level in three months, and the Conference Board’s confidence gauge climbed in July for the first time in five months.

Gasoline Prices

An almost 40-cent jump in gasoline prices since July 1 puts the average cost of a gallon at about $3.72, within 22 cents of this year’s high of $3.94, according to AAA, the country’s biggest motoring organization.

The potential for higher food bills may also hurt consumers’ outlooks and their ability to spend. The worst U.S. drought in 56 years has sent corn futures traded in Chicago up about 65 percent since mid-June. Tyson Foods Inc., the largest U.S. meat processor, said Aug. 6 profit will be lower after the company was forced to pay more for grain to feed animals.

“Consumers clearly continue to feel pressed by the economy, and we don’t expect overnight reversals in consumer confidence,” Richard Smucker, chief executive officer of J.M. Smucker Co., the maker of jams and other food products, said during an Aug. 17 earnings call. “The impact of the current U.S. drought will not be fully understood and realized by the industry for a number of months.”

Today’s Bloomberg index showed confidence among men fell to minus 48.4, the lowest level since October. The measure of women’s sentiment dropped to minus 46.4.

Income Groups

Those making less than $15,000 a year also became more pessimistic. At minus 83.2, the group’s sentiment index was the lowest since December. Moods also darkened among Americans earning at least $100,000, with the gauge dropping to the weakest since January.

Movements in confidence may play a more prominent role as the presidential election draws nearer. The measure of confidence among Democrats was higher than that of Republicans for a record 22nd week. At the same time, Democratic sentiment dropped 3.8 points last week to the lowest level since February.

Presidential Election

The gauge for political independents, a key swing group in this year’s presidential election, was the lowest of all. It fell to minus 52.2, the weakest since December.

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 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.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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

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