Consumer Comfort in U.S. Increases for Third Consecutive Week

Photographer: Craig Warga/Bloomberg

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Photographer: Craig Warga/Bloomberg

Customers enter a store in New York.

Consumer confidence increased for a third straight week as households grew more optimistic about their finances.

The Bloomberg Consumer Comfort Index rose in the week ended Sept. 22 to minus 28.1, the highest since the period ended Aug. 11, from minus 29.4. A gauge of personal finances advanced to a seven-week high as the fewest respondents since late April viewed their budgets as “poor.”

Improvements in the stock and housing markets are leading to gains in household wealth, laying the groundwork for a sustained increase in the consumer spending that is the biggest part of the economy. At the same time, more job opportunities and higher wages are needed to narrow a growing gap between upper- and lower-income Americans.

“Rising equities over the past few weeks have bolstered the confidence and portfolios of Americans, most notably those at the upper end,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Sentiment remains low for almost everyone else.”

Another report today showed jobless claims unexpectedly declined last week, showing further progress in the labor market. Initial claims for unemployment benefits fell by 5,000 to 305,000 in the week ended Sept. 21, according to data released by the Labor Department in Washington. The median forecast in a Bloomberg survey called for an increase to 325,000 applications.

Stocks rose, following the longest slump this year for the Standard & Poor’s 500 Index, as the claims figures showed improvement in the labor marketa. The S&P 500 climbed 0.4 percent to 1,699.34 at 9:36 a.m. in New York.

The consumer comfort index is well below its long-term average of minus 16.2 in weekly surveys since late 1985. All three components of the comfort measure picked up last week.

Personal Finances

The reading of personal finances climbed to 4 from 1.6 as rising home values augment balance sheets. The S&P/Case-Shiller index of property values in 20 cities advanced 12.4 percent in July from the same month in 2012, the biggest gain in more than seven years, a report showed this week.

Today’s figures also showed a less-pessimistic view of the shopping environment. The Bloomberg buying-climate measure increased to minus 35.8 from minus 36.3 the week before.

The gauge of Americans’ current views on the economy rose to minus 52.5, the highest since the week ended Aug. 11, from minus 53.5.

Federal Reserve

At their meeting last week, Federal Reserve policy makers unexpectedly refrained from reducing the pace of monthly bond purchases, saying they need more evidence of lasting improvement in the economy.

Mortgage rates began rising at the end of May after Fed Chairman Ben S. Bernanke signaled the central bank may begin to dial back stimulus. Rates on 30-year mortgages averaged 4.50 percent in the week ended Sept. 19, close to the highest level since July 2011, according to data from Freddie Mac in McLean, Virginia.

A report yesterday showed the effect that gains in home and stock prices are having on Americans’ wealth. Household net worth climbed to $74.8 trillion in the second quarter, an increase of 1.8 percent from the previous three months, the Fed said.

The value of financial assets, including stocks and pension fund holdings, held by American households increased $674 billion in the second quarter. Household real-estate assets grew by $602.3 billion.

Vehicle Sales

The gains are helping underpin spending. Motor vehicles sold in August at the fastest annualized rate since November 2007, according to data from Ward’s Automotive Group. The latest results at General Motors Co., Ford Motor Co. (F), and Toyota Motor Corp. surpassed analysts’ estimates.

At the same time, some Americans are cutting back elsewhere, a sign spending will be slow to accelerate heading into the holiday shopping season without faster growth in income and wages. U.S. chains are bracing for a tough holiday season, when sales are projected to rise 2.4 percent, the smallest gain since 2009, according to Chicago-based ShopperTrak.

“The general sentiment is somewhat more conservative,” Clay Creasey, chief financial officer at Toys R Us Inc., said on a Sept. 24 earnings call. “I have seen the numbers or surveys or whatever that talk about continued slowness in the toy category.”

Washington politics may be restraining consumer sentiment as Republicans and Democrats spar over the federal budget and increasing the debt ceiling.

Income Gap

Today’s figures also showed a growing gap between upper and lower-income Americans, which was the widest since late July. A gauge of those earning more than $100,000 a year climbed to 17.6 last week from 13.4. An index of people making less than $15,000 showed less improvement -- rising to minus 64 from minus 66.8.

The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, 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: Ben Schenkel in Washington at bschenkel@bloomberg.net

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

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