U.S. Consumer Comfort Last Week Holds Close to Four-Year High

Consumer confidence in the U.S. held close to an almost four-year high last week as pessimism about the performance of the economy eased.

The Bloomberg Consumer Comfort Index was minus 38.8 in the period ended Feb. 26 after reaching minus 38.4, the highest level since April 2008, in the previous period. It marked the third straight week above minus 40, which is the level associated with recessions and their aftermath. The margin of error for the headline reading is 3 percentage points.

For the fourth consecutive week, at least half the respondents viewed their personal finances as positive, a run that has been matched once since 2008. While job growth and higher stock values are underpinning sentiment, higher fuel costs pose a threat to further gains in confidence and may discourage households from spending more.

“Right now it does appear that stabilization in the labor market and rising share prices of equities are partially offsetting rising gasoline prices,” said Joe Brusuelas, a senior economist at Bloomberg LP in New York. “Should prices continue to rise at the pump, the Bloomberg Consumer Confidence Index, which has a strong inverse correlation with gasoline prices, will likely deteriorate.”

The price of a gallon of regular unleaded gasoline climbed to $3.73 as of Feb. 28 from a 10-month low of $3.21 in December, according to AAA, the nation’s largest automobile association. Last year, gasoline costs rose to $3.99 a gallon in early May, from $3.10 at the end of January. At the same time, confidence waned.

Jobs and Stocks

“So far this time consumer confidence has resisted the impact of rising prices at the pump, reflecting the counterbalancing effect of improvements in other measures, such as declining unemployment, a rising stock market and some signs of life in the long-suffering housing market,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.

Stocks climbed on signs of an improving economy. The Standard & Poor’s 500 Index rose 0.5 percent to 1,372.27 at 9:37 a.m. in New York.

First-time claims of unemployment benefits unexpectedly fell last week to match a four-year low, pointing to improvement in the labor market. Filings for jobless benefits dropped by 2,000 to 351,000, the Labor Department said.

Personal spending rose less than forecast in January after little change the prior month, Commerce Department figures showed. Purchases climbed 0.2 percent, compared with a median forecast of 0.4 percent in a Bloomberg survey. Spending on services such as utilities fell, which may have reflected warmer winter weather.

Economy Views

Views of the national economy were less pessimistic, with 86 percent saying it’s in “not so good” or “poor” shape, the fewest since the end of February 2011, the Bloomberg confidence report showed. At least nine of 10 respondents rated the economy negatively for a 33-week period ended Jan. 22.

The three components of the consumer comfort index were little changed. An index of the buying climate was minus 43.4, compared with minus 42.7 the previous week. The gauge of personal finances was minus 0.5 after 1 a week earlier. The measure of Americans’ views on the state of the economy improved to minus 72.4 from minus 73.3.

The gauge reached its highest level in a year among Republicans, at minus 30.5, compared with minus 44 for Democrats, the largest partisan gap since September.

The comfort index also was its highest in a year for 18-to-34-year olds and homeowners, “two groups that were disproportionately hard-hit by the recession and its fallout,” Langer said.

Worst in 2009

The weekly Bloomberg comfort index, which measures sentiment back to December 1985, has averaged minus 42.8 this year following last year’s minus 46.8 average. That compared with minus 45.7 for 2010 and minus 47.9 in 2009, the worst full-year reading on record. The best was plus 28.9 in 2000.

The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old 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.

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