Consumer confidence in the U.S. retreated last week from a five-month high, showing an improvement in sentiment will take time to develop.
The Bloomberg Consumer Comfort Index dropped to minus 47.5 in the period ended Dec. 24 from minus 45 the prior week, the highest reading since July. A gauge of the buying climate fell by the most in three months.
Declining home prices, stagnating wages and an unemployment rate at 8.6 percent may be weighing on sentiment. At the same time, household spending, which accounts for about 70 percent of the world’s largest economy, continues to increase.
“While consumer sentiment has shown signs of stabilizing, it is still quite fragile,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Households remain stressed, and it would not be surprising to see further declines in sentiment in early 2012 once the bill for the recent increase in consumer spending comes due.”
Two of the three components in the weekly comfort index worsened. The buying climate index declined to minus 52.5 from minus 46.9, and the gauge of personal finances fell to minus 4.9 from minus 2.5. The measure of Americans’ views of the current state of the economy rose to minus 85 from minus 85.8.
Stocks climbed as concern about Europe’s debt crisis eased after Italian borrowing costs declined at an auction. The Standard & Poor’s 500 Index rose 0.4 percent to 1,254.83 at 9:35 a.m. in New York.
The average number of Americans who have filed applications for unemployment benefits during the last four weeks fell to 375,000, the lowest level since June 2008, Labor Department figures showed earlier. Applications rose for the first time in a month in the week ended Dec. 24, climbing by a more-than-forecast 15,000 to 381,000.
Confidence among Americans is also being influenced by politics, as the U.S. heads into a presidential election year, today’s confidence report showed.
Sentiment “usually is substantially lower among Democrats than it is among Republicans, who tend to be better off,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “But Democrats are now expressing greater economic confidence than usual, Republicans less so, as an apparent reflection of their political preferences.”
Sentiment among Democrats was at minus 44.4 last week, compared with minus 45.2 for Republicans. The former has exceeded the latter in seven of the past nine weeks, the longest such stretch in records going back to 1990, which include Bill Clinton’s presidency.
Households making more than $100,000 a year are among those whose confidence is stagnating. Their comfort index of minus 16.3 last week was the 33rd consecutive negative reading, compared with an average of 9.9 for the group going back to 2005.
The Bloomberg comfort index, which began in December 1985, has averaged minus 46.8 this year compared with minus 45.7 for all of 2010 and minus 47.9 in 2009, the worst full-year reading on record, the report showed.
Nonetheless, Americans are spending more. Sales at retailers rose 4.5 percent last week from a year earlier, according to a chain-store sales index released yesterday by New York-based International Council of Shopping Centers and Goldman Sachs Group Inc.
Merchants kept stores open longer than ever throughout this holiday season. Almost all 600 Toys “R” Us Inc. locations in the U.S. remained open from Dec. 20 to Christmas Eve -- or 112 hours straight. Family Dollar Stores Inc. and Macy’s Inc. also extended hours to lure bargain-hunting shoppers.
Other sentiment indicators have rebounded. The Conference Board’s index of confidence in December climbed to an eight-month high, and the Thomson Reuters/University of Michigan final index of consumer sentiment in December rose to the highest level in six months.
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers age 18 and older. 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.