Consumer confidence last week held close to a six-month high as U.S. households became less pessimistic about the state of the economy.
The Bloomberg Consumer Comfort Index was minus 34.7 in the period ended Oct. 28 after improving the previous week to minus 34.6, the highest since mid-April. The measure has been above minus 40, a level associated with recessions and their aftermath, for the past six weeks.
Cheaper fuel and a budding housing recovery are underpinning confidence, with less than a week before the presidential election. While superstorm Sandy may darken spirits this week following widespread power outages, flooding and at least 50 deaths along the East Coast, the drop will probably prove temporary as Americans’ views of the economy become less downbeat.
“Stabilization of the home prices, a strong equity market and falling gasoline prices has bolstered consumer sentiment over the past several weeks,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “While the impact of Hurricane Sandy may temporarily derail that improvement in coming weeks, the underlying trend in overall sentiment should reassert itself shortly.”
In a separate report today, the Labor Department said the number of Americans filing first-time applications for unemployment benefits fell last week. Jobless claims dropped by 9,000 to 363,000, the department reported. The agency is scheduled to issue its monthly report on employment tomorrow. Payrolls rose by 125,000 in October, while the jobless rate climbed to 7.9 percent from 7.8 percent, according to the median forecasts of economists surveyed by Bloomberg.
The Standard & Poor’s 500 Index gained 0.2 percent to 1,414.90 at 9:31 a.m. in New York. The index reversed a loss in the final hour of trading yesterday as equity markets reopened following a two-day shutdown because of Hurricane Sandy.
The comfort index’s state of the economy gauge rose to minus 63.1, the highest since March 2008, from minus 64.9 the previous week. Eighty-two percent of respondents said the economy is in “bad shape,” the fewest since May 6.
The barometer measuring Americans’ views of their personal finances fell to minus 3.5, the lowest level in five weeks, from minus 2.4 the previous week. The buying climate index decreased to minus 37.4 from minus 36.3 the previous week.
Cheaper gasoline prices are lifting Americans’ moods. The average nationwide price for regular gasoline at the pump fell to $3.51 yesterday, according to AAA, the largest U.S. motoring organization. That’s the lowest level since July. Prices have fallen every day since Oct. 10 and the pump price reached a 2012 high of $3.94 on April 4.
Rising home prices may also be working to lift sentiment. The S&P/Case-Shiller index of property values in 20 U.S. cities rose 2 percent from August 2011, the biggest year-to-year gain since July 2010.
“We’re very pleased with what we’re seeing,” John Foraker, chief executive officer of Berkeley, California-based Annie’s Inc., an organic food company, said on an earnings teleconference on Oct. 30. “Improving consumer confidence and consumers feeling a little bit better about their pocketbook is also helping.”
The pickup in confidence may help sustain the pace of spending, which makes up more than 70 percent of the world’s largest economy. Household purchases rose 0.8 percent in September, the most since February, the Commerce Department said on Oct. 29.
Other indicators of consumer confidence have also increased. The Thomson Reuters/University of Michigan final index of sentiment climbed in October to the highest level since before the recession began five years ago.
It’s not yet clear how economic assessments will shape the presidential election on Nov. 6, according to Gary Langer, president of New-York based Langer Research Associates, which compiles the index for Bloomberg.
“On one hand an improving trend is likeliest to help the incumbent,” President Barack Obama, Langer said. At the same time, the index is “still low enough by historic standards to put him at serious risk.”
The outcome of the election is too close to call between Obama and Republican challenger Mitt Romney, polls show.
Sentiment among Democrats last week dropped to minus 22.9 from minus 22.1 the previous week. Republicans’ confidence decreased to minus 37.8 last week from minus 37.2 the previous week. And among independents, historically the most pessimistic group, the index rose to minus 40.7, the highest level since the end of June, from minus 41.6 the previous week.
Other demographic groups showing recent gains included seniors, whose confidence level climbed to the strongest reading since 2007. The gauge for Americans with annual household incomes between $75,000 and $100,000 rose to minus 4.2, the highest level since March 2008.
The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, conducts telephone surveys with a random sample of 1,000 consumers 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.