Consumer Comfort in U.S. Declined Last Week to Two-Month Low

Consumer confidence fell last week to the lowest level in two months as Americans’ views on the economy deteriorated.

The Bloomberg Consumer Comfort Index (COMFCOMF) fell to minus 28.8 for the period ended Aug. 18 from minus 26.6. The two-week decrease from a more than five-year high reached in early August has been the steepest in a year. The monthly Bloomberg consumer economic expectations gauge held in August at minus 5, a five-month low.

Household sentiment is struggling to gain momentum amid unsteady progress in the job market, rising interest rates and fluctuating fuel costs. At the same time, rising home values are bolstering Americans’ personal wealth and supporting consumer spending, which accounts for 70 percent of the economy.

“The lagged impact of rising gasoline prices and slower job growth are likely the primary causes the behind the stagnation in overall consumer comfort,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.

All three components of the index lost ground last week, with measures of the buying climate and personal finances reaching their lowest levels since June.

The measure on current views on the economy declined to minus 52.6 from minus 47.2, the biggest one-week drop since May 2012. The gauge had climbed to a more than five-year high earlier this month.

The index of Americans’ views of their personal finances eased to 3 last week from 3.2. Nonetheless, the measure has been positive for 19 consecutive weeks. The buying climate gauge worsened to minus 36.7 from minus 35.8, meaning fewer consumers said the time was right to buy needed items.

Expectations Gauge

The monthly expectations gauge showed 33 percent of consumers reporting the economy getting worse and 28 percent saying it’s improving.

The weekly index is “clinging to the recovery zone it first reached in mid-April, but with no sustained forward momentum since then,” said Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg. “For the second month straight, significantly more Americans see the economy as worsening than as improving - not a bright outlook for the future.”

Another report today showed first-time claims for unemployment benefits over the past month declined to the lowest level in more than five years. The four-week average number of applications dropped to 330,500, the least since November 2007, the Labor Department said. Compared with a week earlier, claims rose by 13,000 to 336,000.

Stocks rose after the figures and on better-than-estimated manufacturing data from Germany and China. The Standard & Poor’s 500 Index advanced 0.4 percent to 1,648.75 at 9:35 a.m. in New York.

Other Measures

The Bloomberg comfort index has anticipated changes in other sentiment measures, reaching a five-year high in mid-April, a month before the Thomson Reuters/University of Michigan gauge.

The Conference Board’s confidence index declined more than forecast in July to 80.3 after reaching a five-year high of 82.1 a month earlier.

Labor Department data earlier this month showed uneven improvement in the job market as employers added fewer workers than forecast in July. Payrolls rose by 162,000, the least in four months, and the unemployment rate fell to a four-year low of 7.4 percent as more Americans found part-time work.

Today’s comfort index continued to show a divergence between Democrats and Republicans, with sentiment among Republicans at minus 30.5 and Democrats at minus 9.8, the third time in 12 years the measure has been better than minus 10.

Obama Economy

As President Barack Obama, a Democrat, approaches the halfway point of his second term, 54 percent of Republicans say the economy is getting worse, compared with 20 percent of Democrats.

The less-than-feared impact of federal government budget cuts and improved financial outlook in the states could be giving a boost to government workers, many of whom are unionized and who more often vote as Democrats, Brusuelas said.

The Internal Revenue Service this month said it would delay a furlough day for employees scheduled for Aug. 30, citing “substantial progress in cutting costs.” The Pentagon this month also reduced the number of furlough days to six from 11 for similar reasons.

“The slowing of fiscal restraint around much of the country and outright end in some states and municipalities has likely bolstered the spirits of public-sector workers and is likely one of the main causes of the improvement in consumer sentiment among those that self-identify as Democrats,” he said.

Income Groups

There were few discernible trends among income groups last week. The comfort index for consumers at the very top of the income scale, households earning more than $100,000, was positive for the 29th straight week. It eased to 18.8 from 22.1 the prior week, which was the highest since November 2007. The measure for the lowest-income households, those earning less than $15,000, fell to minus 48 percent from minus 47.7 percent.

Among part-time workers, the index decreased to minus 43.9, the worst reading since mid-June, from minus 38.5. For those employed full time, the gauge improved to minus 14.9 from minus 15.1.

The outlook among men deteriorated to minus 21.9 from minus 16.5, while confidence among women improved to minus 35.2 from minus 36.

Some retailers are feeling the effects of household caution. Target Corp. (TGT) yesterday joined Wal-Mart Stores Inc. (WMT) and Macy’s Inc. (M) in reporting lower-than-expected results as a bumpy economy and increased taxes caused consumers to cut back on clothing and other merchandise.

‘Cautious Spending’

“For the balance of this year, our U.S. outlook envisions continued cautious spending by consumers in the face of ongoing household budget pressures,” Target Chief Executive Officer Gregg Steinhafel said in a statement.

By contrast, Home Depot Inc. and Lowe’s Cos. (LOW) are enjoying a recovery in housing, with second-quarter profit that topped analysts’ estimates.

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 margin of error for the headline figure is 3 percentage points. 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: Lorraine Woellert in Washington at lwoellert@bloomberg.net

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

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