Consumer confidence in the U.S. rose last week by the most since December as higher stock prices made Americans more secure about their finances.
The Bloomberg Consumer Comfort Index climbed to a five-week high of minus 42.2 in the period ended Sept. 9 from minus 46.5. Forty-seven percent of respondents rated their finances positively, the largest share since early August, after the Standard & Poor’s 500 Index posted its biggest weekly gain in almost three months.
A growing number of households who consider their financial situations sound may help maintain the pace of consumer spending, which makes up about 70 percent of the economy. At the same time, persistent joblessness and rising gasoline prices may limit the pace of purchases.
“The gain was apparently a function of increased stock market performance,” said Richard Yamarone, a senior economist at Bloomberg LP in New York. “However, consumers are still plagued by lofty unemployment and rising prices at the pump. The index is struggling to improve, which does not bode well for future consumer spending.”
The number of Americans filing applications for unemployment benefits rose more than projected last week, the Labor Department reported today. Jobless claims increased 15,000 in the week ended Sept. 8, the biggest gain in almost two months, to 382,000. The four-week average, a less volatile measure than the weekly figures, climbed to the highest in almost two months.
Stocks were little changed as investors awaited a Federal Reserve announcement that may initiate a new round of bond buying to spur the economy. The Standard & Poor’s 500 Index dropped less than 0.1 percent to 1,435.77 at 9:36 a.m. in New York.
All three of the comfort index’s components improved last week. The barometer of personal finances climbed to minus 6.2 from minus 13.5. The gauge of Americans’ views on the current state of the economy rose to minus 72.4 last week from minus 75.4, and the buying-climate index increased to minus 47.9 from minus 50.6.
The comfort gauge was still below minus 40, a level “associated with deep economic discontent,” for the sixth straight week, according to Gary Langer, president of New York-based Langer Research Associates, which compiles the index for Bloomberg.
Comfort approached monthly highs among most demographics as well. Those earning more than $100,000 annually were the most confident of all income groups, with an index reading of minus 6.4, the strongest since Aug. 12. Midwesterners had the highest optimism of all regions at minus 37.9, the best in eight weeks.
“Economic fundamentals remain modest but stable,” Jenny Lin, a senior U.S. economist at Ford Motor Co., said during a Sept. 4 sales teleconference. Ford car and light-truck sales rose 13 percent last month, more than estimated. “Consumer confidence is stable as compared to July. The housing sector shows signs of revival.”
At the same time, the gains in payrolls are “still not enough to generate significant declines in unemployment,” she said. A Labor Department report showed last week that payrolls rose less than projected in August, while the unemployment rate dropped to 8.1 percent as Americans left the labor force.
Another threat to consumers’ incomes, regular gasoline prices have climbed to an average of $3.87 per gallon, up 54 cents since the start of July, according to AAA, the nation’s largest motoring organization.
“The advance, fueled in particular just the past week, comes despite a weak jobs report and still-rising gasoline prices,” Langer said in a statement. “The question, with political and economic portent alike, is where consumer sentiment goes from here.”
With the November presidential election drawing closer, shifts in sentiment may shape the outcome. President Barack Obama is working to convince voters that they’re better off than when he was elected four years ago. Republican challenger Mitt Romney is trying to make the case that they’re not and Obama’s policies have failed.
Today’s report showed confidence improved among all three political affiliations surveyed. Both Democrats and Independents were the most optimistic in a month. Confidence was higher among Democrats than Republicans for a record 25 straight weeks in data back to mid-1990.
Another measure of consumer sentiment, the Gallup Economic Confidence Index, climbed to minus 18 in the week ending Sept. 9, up 11 points from the prior period. Gallup said on its web site that the Democratic National Convention may have boosted optimism about the economy.
At the same time, the Bloomberg data showed that Republicans’ sentiment last week climbed more than that of Democrats or Independents.
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.