Consumer confidence in the U.S. held close to a seven-month low last week as Americans’ view of the buying climate fell to the lowest level of the year.
The Bloomberg Consumer Comfort Index was little changed at minus 47.3 in the period ended Aug. 26, from the prior week’s minus 47.4 reading that was the weakest since mid-January. The gain halted a six-week decline that was the longest since 2008, when the U.S. was in a recession.
Unemployment stuck above 8 percent may encourage consumers to keep rebuilding savings rather than boost spending, which accounts for about 70 percent of the economy. Gasoline prices, which are projected to be the highest on record for a Labor Day holiday, are another source of discomfort for Americans.
“Strained household balance sheets, a soggy economy and a sluggish labor market are the probable causes behind the sharply negative view,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Based on the deterioration among different demographic groups and the decline in economic expectations, household spending is likely to remain on a sub 2 percent track for the remainder of this year.”
Consumer spending grew at a 1.7 percent annual rate in the second quarter, the weakest in a year, revised Commerce Department data showed yesterday. The saving rate rose to 4 percent from 3.6 percent in the first three months of the year. The world’s largest economy expanded at a 1.7 percent annual rate, following a 2 percent gain in the first quarter.
Other reports today showed little improvement in the labor market and limited household demand. First-time claims for jobless benefits were unchanged at 374,000 last week, the Labor Department said. The monthly average climbed to a six-week high.
Consumer purchases climbed 0.4 percent in July, the first gain in three months, Commerce Department figures showed. The median estimate of economists surveyed by Bloomberg called for a 0.5 percent increase.
Stocks fell, sending the Standard & Poor’s 500 Index lower for a third time in four days, on concern the global economy is slowing. The S&P 500 dropped 0.6 percent to 1,402.51 at 9:38 a.m. in New York.
Today’s Bloomberg comfort index showed 76 percent of survey respondents last week said it was a bad time to buy needed items, the worst reading since late January. The measure of the buying climate slumped to minus 52.4 from minus 48.9.
The other two components of the comfort gauge showed some improvement last week. The index of Americans’ views on the current state of the economy rose to minus 76.8 from minus 77.3 the prior week, and a barometer of personal finances climbed to minus 12.7 from minus 15.9.
Seven of eight income groups were more pessimistic last week. Sentiment among those making more than $50,000 a year worsened to a five-month low of minus 21.9. Households earning at least $100,000 had the lowest confidence since January, with the index falling to minus 13.
“Persistent unemployment is one challenge; another, the price of gasoline,” according to a statement from Gary Langer, president of New York-based Langer Research Associates, which compiles the index for Bloomberg. Both are “strongly correlated” with declines in comfort.
Gasoline prices jumped 47 cents a gallon since July 1 to $3.80 as of Aug. 28, according to AAA, the nation’s biggest auto organization. This year’s national average cost for Labor Day, which falls on Sept. 3, may be “the highest ever for the holiday,” according to an e-mail from Michael Green, a spokesman for AAA in Washington.
Wal-Mart Stores Inc. (WMT), the world’s largest retailer, will offer holders of its credit and debit cards cheaper fuel to provide relief from rising prices. The discounts, ranging from 15 cents to 10 cents a gallon, will be valid at any of its 1,026 locations that sell gasoline in 20 states, the Bentonville, Arkansas-based company said yesterday. The program runs from Aug. 31 to Dec. 24.
“Our customers are under pressure from the economy,” Chief Merchandising Officer Duncan Mac Naughton said on a conference call. “They also talk about gas prices.”
Confidence declined among various other groups. It fell to the lowest level since January for women and for full-time workers, while it plunged to the worst reading since November for college-educated Americans.
Movements in confidence may play a more prominent role as the presidential election draws nearer. The index of sentiment among Democrats was higher than that of Republicans for a record 23rd week. The comfort gauge for Republicans fell to minus 49.7, the lowest since January, while it improved to minus 39.3 for Democrats.
The gauge for political independents, a key swing group in this year’s presidential election, was minus 51.5 after an eight-month low of minus 52.2.
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.
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