Consumer Comfort in the U.S. Declines as Gasoline Prices Climb

Consumer Comfort in the U.S. Declines
Consumer confidence fell to a six-week low as the costliest gasoline in almost three yearsworsened Americans’ perceptions of their finances. Photographer: Andrew Harrer/Bloomberg

Consumer confidence fell to a six-week low as the costliest gasoline in almost three years worsened Americans’ perceptions of their finances.

The Bloomberg Consumer Comfort Index dropped to minus 46.9 in the period to May 8, the worst reading since March, from the prior week’s minus 46.2. Across regions, sentiment suffered the most in the West, where fuel prices exceed the national average.

Households paid almost $4 a gallon at the pump last week, the most since July 2008. While retailers like Macy’s Inc. have yet to be hurt by waning confidence, a bigger pickup in jobs and lower energy expenses would help ensure consumer spending, which accounts for about 70 percent of the economy, will hold up.

“Consumers will likely need to observe a steady descent in the cost of fuel before sentiment will see a sustainable increase,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Higher energy bills are a “reminder for beleaguered consumers day to day of what has been a difficult economic recovery.”

The number of Americans filing first-time claims for unemployment insurance payments fell less than forecast last week, a Labor Department report today showed, indicating recovery in the labor market is taking time to accelerate.

Applications for jobless benefits decreased 44,000 in the week ended May 7 to 434,000. Economists forecast 430,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls rose, while those getting extended payments decreased.

Retail Sales

Another government report today showed that retail sales rose 0.5 percent in April, reflecting gains at service stations and grocery stores as fuel and food costs climbed. Sales excluding autos and gasoline increased 0.2 percent, the smallest gain in four months.

The survey period for the Bloomberg consumer sentiment gauge was the first to take into account May 1 news that the U.S. killed al-Qaeda leader Osama bin Laden. The death of the FBI’s most-wanted terrorist did little to lift sentiment last week, the comfort report showed.

“Evidently, the damage to household bottom lines by rising food and fuel costs, tepid wage gains and an elevated level of unemployment has trumped the demise of America’s long-time nemesis,” Brusuelas said.

The Bloomberg comfort gauge reflected a decrease in one of its three components: the measure of personal finances fell to minus 10.6 last week, the lowest since the first week of February, from minus 6.9 the prior week.

A gauge of Americans’ views of the economy, at minus 75, was little changed from minus 75.8 the previous week. The buying-climate index was at minus 54.9, compared with the previous week’s minus 56.

Decline in West

The comfort index fell for consumers in the West, matching the levels reached in mid 2009 as the lowest in records going back to 1990. Gasoline prices in the region averaged $4.15 a gallon last week.

Sentiment among younger adults and home renters plunged to the lowest this year, today’s report showed. The confidence index for those aged between 18 and 34 fell to minus 54.5 last week. The measure for Americans renting a home dropped to minus 63.7 from minus 59.8.

The comfort index was higher for Democrats than for Republicans for a fourth straight week, which has happened only once before, in 1996. The gauge for Democrats was minus 38.9, up from minus 41.4 four weeks ago. The index for Republicans was minus 46.8, down from minus 36.5 a month earlier.

“Confidence does tend to rise and fall in step with presidential power,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.

Republicans, Democrats

Confidence among Republicans, who as a group tend to have higher incomes, surpassed Democrats by an average 46.5 points during the last two GOP administrations, Langer said.

Less confidence has yet to concern retailers. Macy’s, the second-biggest U.S. department-store chain, yesterday boosted its 2011 profit forecast after rising sales helped net income to increase more than fivefold in the three months ended April 30, from a year earlier. Cincinnati-based Macy’s also doubled its quarterly dividend.

“We are off to another strong start this year and we have every expectation it will continue,” Karen Hoguet, chief financial officer of Macy’s, said on a conference call with investors yesterday.

Telephone Interviews

The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three.

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. The margin of error for the headline reading is 3 percentage points.

Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania.

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