Consumer confidence last week reached a six-month high as U.S. households became less pessimistic about the economy.
The Bloomberg Consumer Comfort Index rose to minus 34.6 in the period ended Oct. 21, the eighth gain in the last nine weeks, from minus 34.8 the previous period. Americans’ views of economy were the brightest since early May.
Lower gasoline prices, an improving housing market and less joblessness may be helping to ease anxiety as the world’s largest economy approaches a presidential election in less than two weeks. Federal Reserve policy makers yesterday acknowledged a pickup in household spending that is helping to sustain growth as business investment and exports slow.
“Consumer sentiment continues an impressive rebound from summertime lows, mainly due to falling gasoline costs and stabilization of housing prices,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. The labor market will “likely continue to see modest gains, which probably bolstered income expectations among households.”
The number of Americans filing first-time applications for unemployment benefits fell last week, returning to a level that shows the labor market is making limited progress, another report today showed.
Jobless claims decreased by 23,000 to 369,000 in the week ended Oct. 20 from a revised 392,000 the prior period, the Labor Department reported. The drop comes after weeks of big swings in the figures caused by difficulties in adjusting the data for seasonal variations.
Fed policy makers yesterday said the economy is still growing modestly and unemployment remains elevated as they maintained $40 billion in monthly purchases of mortgage-backed securities aimed at spurring the three-year expansion.
Two of the comfort index’s components improved. The barometer of the state of the economy rose to minus 64.9 from minus 67.9 the previous week. The buying climate index inched up to minus 36.3 from minus 36.4. The gauge measuring Americans’ views of their personal finances fell to minus 2.4 from minus 0.1 a week earlier.
A decline in the jobless rate to a more than three-year low of 7.8 percent in September may explain why the Bloomberg confidence index has been on the mend since the end of August. The index has held above minus 40, a level associated with recessions and their aftermath, for five straight weeks.
Signs of a rebound in the U.S. housing market and lower gasoline prices may also be helping to shore up confidence. The average nationwide price at the pump fell to $3.63 a gallon on Oct. 23, the cheapest since Aug. 5, according to AAA, the largest U.S. auto group. Gas prices reached a 2012 high of $3.94 on April 4.
Home prices in July climbed more than forecast, according to a Sept. 25 report. The S&P/Case-Shiller index of property values in 20 cities increased 1.2 percent from July 2011, the biggest 12-month advance since August 2010. That’s giving a lift to sentiment.
“If you can think about sort of where people are coming from, this being their largest asset, when that starts to change,” that’s a reason to become more upbeat, William Rogers, chief executive officer of Atlanta-based SunTrust Banks Inc. (STI), said on an earnings conference call on Oct. 22. “I think this just tries to unlock some of the consumer confidence.”
Other indicators of consumer confidence have also increased. The Thomson Reuters/University of Michigan final index of sentiment jumped in October to the highest level since before the recession began in 2007.
The presidential election, which takes place on Nov. 6, may be shaping economic assessments. Today’s report showed confidence among Democrats rose to minus 22.1, the highest level since mid-April. Confidence among Republicans fell to minus 37.2 from minus 33.2 the previous week. A measure of sentiment among independents climbed to minus 41.6, the highest since the end of June, from minus 44.5.
“Such gains in anticipation of presidential elections are not the norm,” said Gary Langer, president of New-York based Langer Research Associates, which compiles the index for Bloomberg. “While its improved trajectory could potentially help Barack Obama, the CCI remains far lower than its levels when incumbents George W. Bush and Bill Clinton won re- election.”
The demographic groups showing recent gains in confidence included seniors, whose confidence level climbed to minus 25.5 last week, the highest since November 2007. The gauge for Americans with annual household incomes of more than $100,000 rose to 4.9, the third time in the past four weeks it’s been positive. Among men, confidence rose to minus 27.3 from minus 28.7 the previous week. The index among women fell to minus 41.4 from minus 40.5.
The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, conducts telephone surveys with a random sample of 1,000 consumers 18 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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