Confidence among U.S. consumers fell for a second straight week as Americans’ views of the economy dimmed.
The Bloomberg Consumer Comfort Index dropped to minus 34.4 in the week ended March 24, a six-week low, from minus 33.9 in the prior period. The decrease was within the margin of error of 3 percentage points. A measure of the state of the economy declined to the lowest level since early February.
Concern may be growing that automatic cuts in government spending will slow the economy and prompt some companies to curb hiring. A 2 percentage-point increase in the tax used to fund Social Security that’s cut into take-home pay may also be weighing on sentiment.
“We’re getting a lagged effect of the tax increases beginning to set in on the public, in particular the lower income cohorts and the middle class,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Spending will likely slow.”
Another report today showed more Americans than forecast filed for unemployment benefits last week. First-time jobless claims rose by 16,000 to 357,000 in the week ended March 23, the highest level in more than a month, according to data today from the Labor Department in Washington.
Stocks rose after the reports, with the Standard & Poor’s 500 Index climbing 0.1 percent to 1,564.86 at 9:36 a.m. in New York.
The Bloomberg gauge of consumer comfort for the latest period matches the reading from the first week of the year, indicating sentiment has stagnated.
The comfort index’s measure assessing Americans’ views on the current state of the economy fell to minus 61.1 from minus 59.5. The decline was the fourth straight, the longest such stretch since the four weeks ended Dec. 9.
The gauge of personal finances fell to minus 0.5 last week from 0.2 the prior period. The share of Americans with a positive view of their finances held at 50 percent.
The Bloomberg buying-climate index improved to minus 41.7 from minus 42.2 the prior week. Twenty-nine percent said it was a good time to buy things that they want or need, the same as last week.
Increased payroll taxes may be starting to bite. The levy that funds Social Security reverted at the start of the year to its 2010 level of 6.2 percent from 4.2 percent. Workers earning $50,000 take home about $83 less a month. Congressional bickering over the federal budget may also be rattling sentiment.
At the same time, a pickup in employment, higher stocks and an improving housing market are reasons for optimism.
Unemployment (USURTOT) fell to 7.7 percent in February, the lowest in four years, from 7.9 percent in January, and the economy added 236,000 jobs, the Labor Department reported earlier this month.
The Standard & Poor’s 500 Index has gained almost 10 percent so far this year. Rising home prices are also helping boost household net worth.
Property values in 20 U.S. cities jumped 8.1 percent in the 12 months to January, the biggest year-to-year gain since June 2006, according to data from S&P/Case-Shiller issued this week. The group’s index advanced 1 percent from December.
“From a macro perspective, we think the customer is OK, not particularly strong, not particularly weak, and we look at the momentum we have coming in to the year and we feel quite confident,” Karen Hoguet, chief financial officer at Macy’s Inc. (M), said at a March 14 conference. Macy’s is the second-largest U.S. department-store chain.
“That doesn’t mean that we’re not cognizant of all that’s going on in Washington and what’s going on with the payroll tax and every other factor, but we feel as if the environment will be supportive of us achieving the guidance that we’ve laid out,” she said.
Today’s report showed sentiment among those earning less than $15,000 dropped 4.2 points after reaching a five-year high a week earlier. Among households making $100,000 or more a year, confidence was the strongest since mid February.
By region, confidence in the West fell to the lowest level since early January. Women were the most pessimistic in eight weeks, while sentiment among seniors was the weakest since October.
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.
If you’d like to receive a copy of the comfort results on a weekly basis, please contact BloombergNewsPR@bloomberg.com
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