U.S. Consumer Comfort Gauge Holds at Year’s Second-Lowest Level

Consumer Comfort Gauge Holds at Year’s Second-Lowest Level
A shopper walks past a sale sign outside a Calvin Klein store at the Woodbury Common Premium Outlets, a division of Simon Property Group Inc., in Central Valley, New York. Photographer: Emile Wamsteker/Bloomberg

U.S. consumer confidence held last week at the second-lowest level of 2011 as the most households in three years said it was a bad time to spend.

The Bloomberg Consumer Comfort Index was minus 49.3 in the period to Sept. 11, near this year’s low of minus 49.4 reached in May. The buying climate gauge slumped to the lowest level since October 2008.

Nine of every 10 Americans polled had a negative view on the economy as the job market stagnated and wages failed to keep up with inflation, one reason why companies like Best Buy Co. are seeing sales slump. A drop in consumer spending, which accounts for about 70 percent of the economy, would raise the risk the recovery that began two years ago will falter.

“The crisis of confidence among consumers in the economy and policy makers’ ability to alter the direction of the economy has diminished chances of a sustained recovery,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.

Other reports today showed industrial production and consumer prices climbed in August and jobless claims jumped last week.

Output at factories, mines and utilities climbed 0.2 percent after a 0.9 percent gain in July, figures from the Federal Reserve showed, signaling manufacturing will support the world’s largest economy. Factory production, which makes up 75 percent of the total, advanced 0.5 percent.

The cost of living rose 0.4 percent, more than forecast, after a 0.5 percent gain in July, according to a report from the Labor Department. Costs minus fuel and food rose 0.2 percent for a second month.

More Claims

Applications for unemployment benefits climbed by 11,000 to 428,000 in the week ended Sept. 10 that included the Labor Day holiday, another Labor Department report showed. The number of claims was the highest since the end of June, underscoring the risk of further weakness in the labor market.

Stocks advanced for a fourth straight day on optimism that Europe is working to tame its debt crisis. The Standard & Poor’s 500 Index rose 0.8 percent to 1,198.25 at 9:40 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 2.09 percent from 1.99 percent late yesterday.

The consumer comfort gauge, which began December 1985, has been stuck below minus 40 -- the level associated with recessions or their aftermath -- since the end of February. It has averaged minus 45.4 this year, compared with minus 45.7 for 2010 and minus 47.9 in 2009, the year the last recession ended, today’s report showed.

Spending Outlook

A measure of the buying climate plunged to minus 60.7 last week from minus 53.5. Eight of every 10 households polled said it was a bad time to buy needed items, the most since November 2008, when share prices dove following the collapse of Lehman Brothers Holdings Inc.

Those figures aim “an icy blast at retailers for whom mid-September marks the run-up to Christmas,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. Retail sales unexpectedly stagnated in August, figures from the Commerce Department showed yesterday.

The index of Americans’ views of the state of the economy edged up to minus 86.6 last week from minus 88.7, today’s report showed. For the first time in seven weeks, fewer than half, 49 percent, said the economy was in “poor” shape. The gauge of personal finances climbed to minus 0.7 from minus 5.8.

Among groups, the confidence gauge for white Americans dropped last week to the lowest level since February 2010. Those without a high school education saw sentiment slump to a two-year low.

Highest Earners

For those earning more than $100,000 a year, the index was little changed at minus 18.1, the 18th consecutive week of negative readings that in part reflect stock market losses.

Sentiment among Republicans improved last week more than that of Democrats, widening the gap between the two factions to 18 points, the biggest so far this year.

A stagnant labor market is putting pressure on President Barack Obama, lawmakers and the Federal Reserve to spur job growth. Obama last week introduced legislation to boost payrolls.

A majority of Americans don’t believe Obama’s $447 billion jobs plan will help lower the unemployment rate, skepticism he must overcome as he presses Congress for action and positions himself for re-election, according to a Bloomberg poll.

Rating Obama

The downbeat assessment of the American Jobs Act reflects a growing and broad sense of dissatisfaction with the president. Americans disapprove of his handling of the economy by 62 percent to 33 percent, a Bloomberg National Poll conducted Sept. 9-12 showed. The disapproval number represents a nine-point increase from six months ago.

Best Buy, the world’s largest consumer-electronics retailer, this week cut its full-year earnings forecast. The Richfield, Minnesota-based chain also reported a 30 percent decline in second-quarter profit.

“The consumer is making very measured choices,” Chief Executive Officer Brian Dunn said in a Sept. 13 telephone interview. “I don’t think it’s a year where someone is going to buy a TV and a tablet and a new smartphone and go to Disneyland.”

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 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. 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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