Consumer Comfort in U.S. Hovered Near Four-Month Low Last Week

Consumer confidence in the U.S. improved last week for the first time in a month as falling gasoline prices helped stem dismay over household finances.

The Bloomberg Consumer Comfort Index was minus 42 in the seven days ended May 20 after an almost four-month low of minus 43.6 the prior period. The measure, which has a margin of error of 3 percentage points, slumped 12.2 points over the previous four weeks, wiping out almost the entire gain for the year.

The cheapest gasoline in three months, a slowdown in firings and a more stable housing market may be blunting the influence of falling stock prices that reflect growing concern over the European debt crisis. Bigger gains in employment and wages will be needed to further spur consumer sentiment and spending, which accounts for about 70 percent of the economy.

“A slower pace of initial jobless claims and falling gasoline prices modestly bolstered confidence,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. At the same time, the survey “continues to point to widespread discontent among the American public.”

The number of Americans filing first-time claims for unemployment insurance payments was little changed last week, adding to evidence the labor market recovery may have paused, another report showed today. Applications for jobless benefits decreased by 2,000 to 370,000 in the week ended May 19, according to the Labor Department.

Also today, Commerce Department data showed orders for computers, machinery and other non-military capital equipment dropped in April for a second month, pointing to a slowdown in business investment.

Investment Slowdown

Bookings for such non-defense goods excluding aircraft decreased 1.9 percent after falling 2.2 percent in March, the first back-to-back decline in a year, data from the Commerce Department showed today in Washington. Demand for all durable goods, those meant to last at least three years, rose 0.2 percent, matching the median forecast of economists surveyed by Bloomberg News.

Stocks were little changed as a rally in shares of Hewlett-Packard Co. helped offset the disappointing numbers on the economy. The Standard & Poor’s 500 Index was at 1,318.3 at 9:40 a.m. in New York, down less than 0.1 percent from yesterday’s close.

Readings lower than minus 40 for the comfort measure are correlated with “severe economic discontent,” according to Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg. Since its inception in December 1985, the gauge has averaged minus 15.3.

Four-Year High

The comfort index began 2012 at minus 44.8 and reached a four-year high of minus 31.4 in the week ended April 15.

Payroll gains that averaged 267,000 workers a month in January and February have given way to average increases of 135,000 over the past two months, according to data from the Labor Department.

“Improving employment encouraged that rally” earlier in the year, Langer said in a statement today. “Underwhelming news on the job front since has clipped its wings.”

The advance in the comfort index from January through mid-April predated similar gains in other surveys. The Thomson Reuters/University of Michigan preliminary gauge of consumer sentiment rose in May to the highest level in four years, a report showed on May 11.

Between 1996 and the first quarter of 2012, the consumer comfort buying-climate index explained 69 percent of the quarterly variation in inflation-adjusted consumer spending, according to calculations by Brusuelas.

Spending Outlook

The 14-point drop in the gauge from early April through the week of May 12 “does not bode well for real household spending in the current quarter following the 2.9 percent increase through the first three months of the year,” Brusuelas said.

All three components of the comfort index improved. A measure of views on the state of the economy advanced to minus 68.7 from minus 69.6, the report showed. An index of the buying climate increased to minus 46.5 from minus 48.2, and a gauge of personal finances rose to minus 10.8 from minus 12.9.

Less expensive fuel is providing some respite to consumers. The average price of a gallon of gasoline fell to $3.68 on May 23 and is down 26 cents from a peak this year of $3.94 in early April, according to AAA, the nation’s largest auto group.

One bright spot in the survey was the ninth consecutive positive reading among Americans earning more than $100,000. Sentiment for most other income categories worsened last week.

Regional Breakdown

Consumer comfort climbed in three regions and declined in the West. Confidence also improved for Americans with full-time jobs and those working part-time, while moods worsened for the unemployed.

Among independents, a key swing group in this year’s presidential election, the comfort gauge advanced to minus 44.4 from minus 48.6 the prior week. The measure worsened a bit for Democrats and was little changed for Republicans.

Companies noting the uneven nature of gains and losses in confidence include Target Corp., the second-largest U.S. discount retailer. Consumers were more confident in their financial situations in the first quarter, then sentiment waned, executives said. Target raised its full-year earnings forecast and projected same-store sales will rise 3 percent this quarter.

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