American Consumers in 2013 Most Upbeat Since Before Recession

Photographer: Jin Lee/Bloomberg

An improved job market, higher stock prices and rising home values lifted sentiment at the end of the year and helped drive holiday retail shopping. Close

An improved job market, higher stock prices and rising home values lifted sentiment at... Read More

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Photographer: Jin Lee/Bloomberg

An improved job market, higher stock prices and rising home values lifted sentiment at the end of the year and helped drive holiday retail shopping.

American consumers in 2013 were more upbeat than at any time in the previous six years as views on the economy, finances and the buying climate improved.

The Bloomberg Consumer Comfort Index (COMFCOMF) averaged minus 31.4 for 2013, the highest since 2007, when it was minus 10.5. The weekly index fell for the first time since mid-November, dropping to minus 28.7 for the period ended Dec. 29, from minus 27.4.

An improved job market, higher stock prices and rising home values lifted sentiment at the end of the year and helped drive holiday retail shopping. Stronger wage and employment growth would help propel bigger gains in confidence and encourage Americans to boost spending, which accounts for almost 70 percent of the economy.

“Consumers were somewhat uneasy in the latest week, however, record stock market evaluations and increased job creation has bolstered confidence levels from relatively low levels,” said Richard Yamarone, a senior economist for Bloomberg LP in New York.

Other figures today showed jobless claims declined last week to the lowest level in a month. Applications for unemployment benefits fell by 2,000 to 339,000 in the week ended Dec. 28, according to the Labor Department.

The job market continues to make progress. Payrolls grew by 195,000 workers in December after a 203,000 gain a month earlier, according to the median forecast in a Bloomberg survey of economists. Labor Department employment data are due Jan. 10.

Equity prices also are boosting Americans’ wealth, with the Standard & Poor’s 500 Index surging 30 percent last year, the most since 1997.

Buying Climate

All three components of the comfort index cooled last week, led by a drop in buying climate, which fell to minus 33.2 from a seven-month high of minus 31.8 as fewer people said now is a good time to make purchases. Between early November and Christmas, the buying climate rating rose 8.8 points and it’s 4.7 points higher than the average for the year.

Americans’ views of their personal finances fell to 4.1 from 6.4. The gauge, which has been positive for six weeks, is 1.2 points higher than the 2013 average.

An assessment of current economic conditions fell to minus 57.1 from minus 56.8, today’s report showed, putting it 25.7 points below its long-term average.

“Buy-in on this measure is critical if consumer sentiment is truly to break out in 2014,” said Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg. “The job market is a key challenge. Even with its recent gains, unemployment remains high enough to make the recovery story a tough sell to many Americans.”

Holiday Sales

Retail sales rose 3.5 percent during the holiday season, helped by deep discounts at malls and purchases of children’s apparel and jewelry, MasterCard Advisors SpendingPulse said. Sales of holiday-related categories, such as clothing, electronics and luxury goods, rose 2.3 percent from Nov. 1 through Dec. 24 compared with a year earlier, the Purchase, New York-based research firm said Dec. 26. SpendingPulse tracks total U.S. sales at stores and online via all payment forms.

Consumers are also buying more cars. Auto sales advanced to a 16.3 million annualized rate in November, the highest since May 2007, according to data from Ward’s Automotive Group.

The comfort index, based on weekly polling since 1985, remains below its average of minus 16.4 in data going back to December 1985. For the final week of 2007, during the month the U.S. slipped into a recession, it measured minus 20, almost nine points higher than the end of 2013.

Optimism waned last week among homeowners, college graduates, Democrats and full-time workers.

Income Groups

Sentiment flagged in most income brackets, including those making less than $40,000 a year and more than $100,000 a year. Among highest-income households, the index fell to 14.4, the lowest since the week ended Dec. 1. The gauge of high-income earners has been positive since early February.

Respondents 65 and older also reported less confidence, with their measure falling to minus 30.5, the lowest since Nov. 3. Sentiment deteriorated among women to minus 37.4, the weakest reading in a month.

In contrast, men reported improvement at minus 19.7, the best showing since Sept. 22 and 5.5 points above their 2013 average of minus 25.2.

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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