American consumers grew a bit more optimistic at the start of the year, with their outlooks on the economy improving to a more than three-month high.
The Bloomberg Consumer Comfort Index advanced to minus 28.4 in the period ended Jan. 5 from minus 28.7. That puts the gauge above the 2013 average of minus 31.4. More people last week also said that now is a good time to shop.
Growing employment opportunities, higher stock prices and less political brinksmanship in Washington are helping brighten consumers’ views. Job gains leading to stronger wage growth would provide a further boost and encourage Americans to increase their spending, which accounts for almost 70 percent of the economy.
“Consumer sentiment has reversed its late-2013 slide, primarily due to improving labor market conditions and more confidence in individual household finances,” said Joe Brusuelas, a senior economist for Bloomberg LP in New York. ‘We’ll likely see continued recovery in household sentiment throughout the year.”
The job market is on the mend. Payrolls grew by 196,000 workers in December after a 203,000 gain a month earlier, according to the median forecast in a Bloomberg survey of economists before tomorrow’s Labor Department report.
Figures today showed applications for unemployment benefits dropped last week to the lowest level since the end of November. Jobless claims fell by 15,000 to 330,000 in the period ended Jan. 4, the Labor Department said.
Stocks advanced after jobless claims fell and Macy’s Inc. rallied. The Standard & Poor’s 500 Index climbed 0.2 percent to 1,841.46 at 9:31 a.m. in New York.
Higher property values and stock portfolios are driving gains in household wealth. The Standard & Poor’s 500 Index surged 30 percent last year, the most since 1997. Stocks have advanced on stronger corporate earnings even as the Federal Reserve announced Dec. 18 that it will slow its monthly bond buying program.
Americans’ assessment of current economic conditions improved to minus 55.9, the strongest reading since September, from minus 57.1, today’s report showed.
Consumers’ views of the buying climate climbed to minus 32, matching the second-highest level since May, from minus 33.2 the prior week, according the report.
A gauge of their personal finances fell to 2.6 from 4.1. It still marked the seventh straight week that the measure has been positive.
Recent headway in sentiment coincides with a pickup in spending. Retail sales excluding automobiles probably climbed 0.4 percent in December for a second month, based on the median estimate in a Bloomberg survey of economist ahead of the Jan. 14 release.
Auto purchases increased 7.6 percent to 15.6 million in 2013, the industry’s best year since 2007, even as cold weather damped demand in December.
Today’s report showed sentiment waned last week among the lowest earners and increased among the most well-to-do. A gauge of confidence of those making less than $15,000 a year dropped 5.5 points from the prior week to minus 61.6, while an index of the highest-income households climbed almost a point to 15.3.
Positive sentiment at the upper-end of the income scale is reflected at stores such as Neiman Marcus Group LLC, a Dallas-based luxury retailer that carries goods from designers such as Burberry and Jimmy Choo.
Shoppers are “really open to spending money” on unique merchandise, Chief Executive Officer Karen W. Katz said in a Dec. 18 earnings call. “The kind of data we’re getting around the most affluent consumers are that she’s feeling good about her balance sheet.”
Single Americans last week also felt more positive than at any time since August, today’s report showed. Respondents with part-time employment also turned the most optimistic in five months.
Regionally, confidence improved in the Northeast and the Midwest, while dropping in the South and the West.
The comfort index, based on weekly polling since 1985, still begins the year 12 points below its 28-year average and 19 points worse than its pre-recession level, Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in an analysis accompanying the release.
The Bloomberg Consumer Comfort Index (COMFCOMF) 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 editor responsible for this story: Christopher Wellisz at email@example.com