U.S. Consumer Comfort Drops to Two-Month Low on Economy Concern

U.S. Consumer Comfort Drops to Two-Month Low on Economy Concern
Greater discontent about the economy was accompanied by dimmer views of personal finances and the buying climate, a sign consumer spending will be slow to pick up. Photographer: Daniel Acker/Bloomberg

Consumer confidence in the U.S. fell this week to the lowest level in two months as Americans became more discouraged about the economy.

The Bloomberg Consumer Comfort Index dropped to minus 41.9 in the period ended Aug. 5 from minus 39.7. The gauge hasn’t climbed since the end of June. Americans’ view of the economy fell to the lowest level since February.

Greater discontent about the economy was accompanied by dimmer views of personal finances and the buying climate, a sign consumer spending will be slow to pick up. A recent increase in gasoline prices and scant improvement in the labor market are also restraining confidence among lower-income households.

“The American public is downright sour on their own economic prospects and those of the nation as a whole due to the growing labor slack in the economy,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. The share of respondents in the Bloomberg survey who rated the economy as “poor” climbed this week to a seventh-month high.

Another report today showed fewer Americans filed applications for unemployment benefits last week, a sign the labor market may keep improving after job growth picked up in July. Jobless claims fell by 6,000 to 361,000 in the week ended Aug. 4, the Labor Department said. The median forecast in a Bloomberg survey called for an increase to 370,000.

Stocks fell as concern about Europe’s economy. The Standard & Poor’s 500 Index dropped 0.1 percent to 1,400.97 at 9:37 a.m. in New York.

Economy View

The Bloomberg index on the current state of the economy was minus 74.4 last week, the weakest since Feb. 5, after minus 74.2 in the prior period. Eighty-seven percent rate the economy negatively, matching the previous week’s reading as the most since February and 22 percentage points more than the average in 26 years of polling.

The gauge of personal finances dropped to minus 3.7 from minus 0.4, while the buying-climate index fell to minus 47.7 from minus 44.5. Both are at their lowest levels since May.

Gasoline prices that are rising along with 8.3 percent unemployment are hurdles for Americans, whose spending accounts for 70 percent of the economy. After reaching a low this year of $3.33 a gallon on July 1, the average price of regular gasoline nationwide reached $3.65 a gallon on Aug. 7, the highest since May, according to AAA, the country’s biggest motoring organization.

Other measures of confidence have been mixed. The Conference Board’s gauge unexpectedly rose in July for the first time in five months, while the Thomson Reuters/University of Michigan’s index fell to the lowest level of the year.

Meals Out

Demand at some restaurants has started to cool. McDonald’s Corp., the world’s largest restaurant chain, said sales at stores open at least 13 months were unchanged worldwide in July, partly because the weaker U.S. economy weighed on consumers. Chipotle Mexican Grill Inc. and Starbucks Corp. have reported sales growth has started to slow.

Higher-end merchants are also feeling the pinch. Ralph Lauren Corp., the retailer of its namesake brand clothing, projected quarterly sales that trailed analysts’ estimates. Tiffany & Co. cut forecasts for the year and Coach Inc. posted sales that trailed analysts’ projections.

“We don’t expect to have a true read on the health of consumer until we’re through fall and holiday selling periods,” Roger Farah, president and chief operating officer at Ralph Lauren, said on an Aug. 8 earnings call. “By then we should also have a better understanding of the political landscape in the U.S.”

Presidential Election

Today’s report also showed political affiliations continue to sway sentiment. The measure of confidence among Democrats was higher than that of Republicans for a record 20th straight week. The gauge for political independents, a key swing group in this year’s presidential election, fell to minus 48.7, matching its lowest reading this year.

Confidence among American men fell to the lowest level of the year, today’s figures showed. It marked the 13th time since 1990 that the index has fallen below women’s confidence gauge.

“One likely reason is women’s greater Democratic allegiance and higher support for Barack Obama in this election year, sentiment that can be expressed in economic assessments,” Gary Langer, president of Langer Research Associates in New York, which compiles the index for Bloomberg, said in a statement.

The confidence gauge among 45-to-54 years old slumped to the lowest level since 2009.

The group “is likely having a difficult time rebuilding nest eggs following the recession amidst weak wage growth,” Brusuelas said.

Lower-Income Households

Lower-income households were also more pessimistic last week, with declines in confidence among Americans earning less than $40,000 a year.

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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE