Consumer Comfort in U.S. Rises to Five-Year High on Economy View

Photographer: Scott Eells/Bloomberg

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Photographer: Scott Eells/Bloomberg

Shoppers look at a store's window display in New York.

Consumer confidence climbed last week to the highest level in more than five years as Americans became less pessimistic about the economy.

The Bloomberg Consumer Comfort Index rose to minus 27 in the period ended July 28, the strongest reading since January 2008, from minus 27.3 a week earlier. The margin of error for the headline figure is 3 percentage points. Measures of personal finances and buying climate were also little changed.

Rising residential property values and sustained gains in the labor market have helped improve consumers’ sentiment, which may spur greater spending in the second half of 2013. The figures signaled households are looking past rising borrowing costs as the expansion continues and gasoline prices at the pump retreat from four-month highs.

“Sustainable, albeit modest growth in the labor market and the economy likely bolstered consumer spirits,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The key to sustained improvement is acceleration in hiring and an improved wage environment, something that has been a significant challenge during the current business cycle.”

Another report today showed fewer workers filed for unemployment benefits last week. Initial jobless claims fell by 19,000 to 326,000, the lowest level in more than five years, in the period ended July 27, the Labor Department said.

Stocks rose following the figures and after the Federal Reserve vowed to maintain stimulus. The Standard & Poor’s 500 Index advanced 0.9 percent to 1,700.56 at 9:35 a.m. in New York.

Payrolls at U.S. companies climbed by 200,000 workers in July, the most this year, following a revised 198,000 gain the prior month, figures from the Roseland, New Jersey-based ADP Research Institute showed yesterday.

Second Quarter

The economy grew more than expected in the second quarter, a sign it was overcoming government budget cuts and higher taxes. Gross domestic product, the value of all goods and services produced, rose at a 1.7 percent annualized rate after a 1.1 percent gain the prior quarter, Commerce Department data showed yesterday. Consumer spending, which accounts for 70 percent of the world’s largest economy, increased 1.8 percent after advancing 2.3 percent.

The Bloomberg comfort index (COMFCOMF) has foreshadowed changes in other measures. The Thomson Reuters/University of Michigan final index of consumer sentiment rose to its highest level in six years, exceeding forecasts, a report showed last week.

The advance in the Bloomberg index was driven by a more optimistic view of the state of the economy, with the measure improving to minus 49.8, the strongest reading since January 2008, from minus 50.5 the prior period.

Personal Finances

A gauge of Americans’ views of their personal finances was at 4.2 compared with 4.3 a week earlier, marking the 16th week the measure has been in positive territory, the longest streak since late 2007 into early 2008. An index of the buying climate rose to minus 35.4 from minus 35.8 as more Americans said the time was right to buy.

The price of a gallon of regular gasoline fell 4 cents last week to $3.63, according to data from AAA, the nation’s largest motoring organization.

Steady gains in the labor market and historically low borrowing costs are supporting homes sales and boosting property values.

The S&P/Case-Shiller index of home prices in 20 U.S. cities climbed 12.2 percent in May from the same time last year, the biggest 12-month gain since March 2006, a report showed earlier this week.

Home Sales

Purchases (NHSLTOT) of new houses rose 8.3 percent to an annualized pace of 497,000 homes, the highest level since May 2008, the Commerce Department said last week. The median selling price of a new home appreciated 7.4 percent to $249,700 in June from $232,600 a year earlier.

Kilroy Realty Corp. (KRC), a real estate investment trust that deals with office and industrial properties in California and Washington, said the broader economic climate in the U.S. continues to bolster gains in the housing market. The company is projecting rents will rise.

“Our key markets all exhibited economic growth and improving commercial real estate fundamentals last quarter,” Jeffrey Hawken, executive vice president and chief operating officer of the Los Angeles-based company, said in a July 30 earnings call. “From Seattle south to San Diego, regional unemployment rates in our submarkets continue to decline while job growth remained steady.”

Confidence among men rose to minus 15.9 last week, its highest since January 2008, from minus 16.6, according to today’s comfort data. Sentiment among women held at minus 37.3 for a second week, its weakest reading since April. The gap in confidence among the sexes is the widest since December 2010.

Income Gap

This might reflect what has been a growing income gap in the comfort index as median incomes for women tend to be lower than for men, said Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg.

The comfort indexes for renters and for single adults were the highest since March 2008. The outlook among renters improved to minus 32.9 from minus 36 a week earlier. The index for single adults rose to minus 22.1 from minus 28.6. Comfort among married adults last week fell to minus 20.9 from minus 17.6, its strongest reading since January 2008.

Top Earners

For households earning more than $100,000, the index was positive for the 26th straight week, easing to 13.2 from 18.8 the prior week. The measure for households earning less than $15,000 improved to minus 64.5 from minus 66.2. Confidence among households earning between $15,000 and $25,000 increased for a third week to minus 45 from minus 48.1.

The Bloomberg Consumer Comfort Index conducts telephone surveys with a random sample of 1,000 consumers ages 18 and older. Each week, 250 respondents are asked for their views on the U.S. 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.

To contact the reporter on this story: Alexandria Baca in Washington at abaca3@bloomberg.net

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

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