Consumer Sentiment in U.S. Falls to Eight-Month Low: Economy

Photographer: Patrick T. Fallon/Bloomberg

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Photographer: Patrick T. Fallon/Bloomberg

A man carries a mattress past rows of children's toys displayed for sale during the LA Kids Consignment Sale in Burbank, California.

Consumer confidence sank last week to the lowest level in eight months as Americans grew more concerned the budget standoff in Washington hurt the world’s largest economy.

The Bloomberg Consumer Comfort Index declined to minus 36.1 in the period ended Oct. 20, the lowest since February, from minus 34.1. The report also showed more households were pessimistic about the economy than at any time in the past year even as lawmakers approved a deal that ended the partial shutdown of federal agencies.

The agreement to fund the government into early 2014 will probably temporarily help sentiment improve going into the holiday-shopping season. At the same time, data showing hiring has slowed and more Americans have applied for unemployment benefits in recent weeks indicate the job market has lost momentum, which may thwart a pickup in household spending.

“We will probably see some bounce in confidence after these settlements, even though they’re temporary and imperfect,” said Sam Coffin, an economist at UBS Securities LLC in Stamford, Connecticut. “Consumption really is being driven by those labor-market developments, and it looks like they’ve been a little bit softer in the last three months.”

Other reports today showed more Americans than forecast applied for unemployment benefits last week, the trade deficit was little changed in August and jobs openings increased that month.

Shares Climb

Stocks rose as earnings from companies such as homebuilder PulteGroup Inc. beat estimates. The Standard & Poor’s 500 Index climbed 0.3 percent to 1,752.07 at the close in in New York.

Shares also got a boost from a report showing manufacturing in China, the world’s second-biggest economy, strengthened more than forecast in October in a sign the recovery is gaining momentum. Similar reports out of Europe showed euro-area services and manufacturing output unexpectedly slowed, while the U.S. index issued by Markit Economics decreased.

Last week’s decline in the U.S. consumer comfort index marked the gauge’s fourth consecutive drop. It’s now fallen almost 13 points since reaching a more than five-year high of minus 23.5 in August.

All three of the index’s components receded last week. The gauge of Americans’ current views on the economy deteriorated to minus 68.2, the lowest since October 2012, from minus 65.3 the week before.

Comfort Components

The buying-climate measure fell to minus 38.3 from minus 36.9 as fewer respondents said that now is the time to make purchases. The reading for personal finances declined to minus 2, the worst since April, from minus 0.1.

Sentiment is waning as the job market shows signs of cooling. Employers added 148,000 workers to payrolls in September, fewer than the median forecast of economists surveyed by Bloomberg, Labor Department figures showed this week. The unemployment rate fell 0.1 percentage point to 7.2 percent, the lowest since November 2008.

The number of Americans filing applications for jobless benefits fell by 12,000 to 350,000 in the week ended Oct. 19, the Labor Department said in Washington. Claims reached a six-month high of 373,000 in the week ended Oct. 5 as the 16-day partial shutdown of federal agencies was in its first week.

Claims Elevated

A backlog in California after the state switched computer systems and applications from non-federal workers furloughed because of the shutdown have kept the count elevated, according to the Labor Department.

The median estimate of 48 economists surveyed by Bloomberg called for 340,000 claims. (INJCJC) Forecasts ranged from 320,000 to 365,000.

Another Labor Department report today showed job openings increased in August to the highest level in three months. The number of positions waiting to be filled climbed by 75,000 to 3.88 million from 3.81 million in the prior month. The pace of hiring was little changed, indicating employers were taking time to fill the vacancies.

“We’ve seen a slowing in hiring, which is more reflective of the weak pace of growth we’ve seen,” said Bricklin Dwyer, an economist at BNP Paribas in New York. “While we’re not likely to see a big firing wave on the back of this government shutdown, it probably will keep some people from hiring.”

Auto Sales

AutoNation Inc. (AN), the largest U.S. retailer of new cars and trucks, is among companies saying business is starting to rebound after the fiscal impasse in Congress slowed sales.

“We did feel the government shutdown impact,” Mike Jackson, chairman and chief executive officer of Fort Lauderdale, Florida-based AutoNation, told Betty Liu on Bloomberg Television’s “Surveillance.” “It was definitely a pause in the intensity of sales starting sometime in the middle of September and it continued until the shutdown was finally resolved,” he said. “Now we see the pace resuming. Until then, the quarter had been extremely strong.”

Record demand for American-made automobiles also helped the nation’s trade deficit stabilize in August, figures from the Commerce Department showed today. The gap increased 0.4 percent to $38.8 billion from $38.6 billion in July.

Exports fell 0.1 percent to $189.2 billion as an all-time high in foreign purchases of U.S. autos and parts was offset by a plunge in demand for industrial supplies, such as petroleum products and chemicals, the Commerce data showed.

Fuel Costs

A drop in fuel costs is among the things helping to bolster consumers in the face of the gridlock in Washington. The average cost of a gallon of regular-grade gasoline fell to $3.34 on Oct. 22, the lowest since Jan. 24, according to data from AAA, the nation’s largest motoring group. Since the end of August, prices have eased by about 25 cents per gallon of fuel.

Nonetheless, some companies are saying customers are more hesitant ahead of the holiday-shopping season that begins next month as Americans continue to grapple with government infighting, budget cuts and an increase in the payroll tax.

“We’ve seen an overall slowdown, a little bit of softness in our traffic,” David Lenhardt, chief executive officer of PetSmart Inc. (PETM), a Phoenix-based retailer of pet supplies, said on an Oct. 17 earnings call. “We do think it’s an uncertain consumer environment. I think whether it be the shutdown, whether it be payroll tax, whether it be sequester, the customer is more uncertain these days.”

To contact the reporters on this story: Ben Schenkel in Washington at bschenkel@bloomberg.net; Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

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

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