GM Sells Stake in Ally Financial for $900 Million
Consumer Comfort Gauge Signals Severe Discontent for Fifth Week
Consumer confidence in the U.S. was little changed last week, hovering near an eight-month low, as Americans struggled with rising gasoline prices and elevated unemployment.
The Bloomberg Consumer Comfort Index was at minus 46.5 in the period ended Sept. 2 compared with minus 47.3 in the prior week. It was the fifth consecutive week the index has registered a reading lower than minus 40, a level typically associated with severe economic discontent.
A ninth consecutive weekly advance brought gasoline prices to the highest level in four months, giving households reason to be concerned about their finances. The dreary views are prompting retailers and manufacturers such as General Motors Co. (GM) to use promotions to entice customers.
“Despite very aggressive discounting from retailers and General Motors that have bolstered retail sales, households remain quite pessimistic on the state of the economy and their own personal finances,” said Joseph Brusuelas, a senior economist with Bloomberg LP in New York.
Two reports today contained some encouraging news on the jobs front. Fewer Americans than forecast filed applications for unemployment benefits last week, figures from the Labor Department showed. Jobless claims decreased by 12,000 to 365,000 in the week ended Sept. 1, the fewest in a month. The median estimate of 48 economists surveyed by Bloomberg called for a drop to 370,000.
Companies added more workers than forecast in August, data from Roseland, New Jersey-based ADP Employer Service showed. Employment increased by 201,000, the biggest gain in five months. The median forecast of 41 economists surveyed by Bloomberg called for an advance of 140,000.
Stocks advanced on the jobs data and as European Central Bank President Mario Draghi said policy makers agreed to an unlimited bond-purchase program as they try to regain control of interest rates in the euro area. The Standard & Poor’s 500 Index climbed 1.1 percent to 1,419.37 at 9:40 a.m. in New York.
The Consumer Comfort Index is based upon Americans’ ratings of the national economy, the buying climate and their own finances. The gauge was at minus 47.4 in the week ended Aug. 19, the lowest level since mid-January.
The personal finances gauge dropped to minus 13.5 last week from minus 12.7. The number of consumers who say their budgets were in “poor” shape, the most negative rating, climbed to 23 percent, its highest since November.
The average cost of a gallon of regular gasoline climbed to $3.83 last week, up 50 cents since July 1 and the highest since late April, according to figures from AAA, the largest U.S. auto group.
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 75.4 from minus 76.8 the prior week, and the buying climate barometer advanced to minus 50.6 from minus 52.4.
The comfort index rose in all regions except the South, where the index was its lowest since January.
The slump in confidence has yet to derail consumer spending, the biggest part of the economy.
Chrysler Group LLC, Ford Motor Co. (F), General Motors, Toyota Motor Corp. (7203) and Honda Motor Co. this week reported U.S. sales in August that beat analysts’ estimates. Light-vehicle deliveries last month were at the fastest pace since the government’s 2009 “cash for clunkers” program.
While unemployment remains high, the number of Americans in July out of work for 27 weeks or longer was down 1.5 million from the April 2010 peak, according to the Labor Department. The total represented 41 percent of all jobless, the lowest share since 2009. The department will release August employment data tomorrow.
Retailers including Gap Inc. and Macy’s Inc. posted August same-store sales that also topped analysts’ estimates as consumers took advantage of back-to-school promotions, according to reports last week.
Americans are in a sour mood as Democrats gather in Charlotte, North Carolina, this week for their nominating convention. The November election might turn on whether President Barack Obama can convince voters that they’re better off than they were when he first was elected four years ago. Republican challenger Mitt Romney is trying to make the case that they’re not.
After declining from mid-April, the consumer comfort index is near the level it was when Obama was elected in 2008, according to Gary Langer of Langer and Associates in New York, which compiles the index for Bloomberg.
“Barack Obama faces a stern crowd as he prepares to accept the Democratic presidential nomination with a request for more time to fix the troubled economy,” Langer said in a statement.
Republicans are particularly downbeat, reporting a more glum outlook this year than in 2008, averaging minus 39.4 compared with minus 15.7 four years ago. The comfort index for Republicans was minus 52.9 last week, the lowest since November.
Democrats say they’re doing better. A measure of their confidence is up 22 points from its 2008 average of minus 56.3. Democratic voters are on track to end the year with a higher average comfort index than Republicans for the first time in records going back to 1991.
The gauge for political independents, a key swing voting group, improved to minus 49.7 last week from an eight-month low of 52.2 a week earlier.
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: Lorraine Woellert in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Christopher Wellisz at email@example.com