Consumer confidence climbed last week as Americans’ ratings of the economy reached the highest level in more than four years.
The Bloomberg Consumer Comfort Index rose to minus 34.4 in the period ended Nov. 4, the best reading since April, from minus 34.7 the previous week. Twenty percent of those surveyed had a positive view of the world’s largest economy, the most since March 2008.
The gains may further invigorate household spending and propel retailers like Macy’s Inc. ahead of the year-end holidays. The end of the contentious presidential race, combined with an improving job market, may continue to boost sentiment even as the lingering effects of superstorm Sandy limit any short-run rebound, according to economist Joseph Brusuelas.
“With the election now in the rear-view mirror and the holidays ahead, the underlying improvement in the trend across all major consumer confidence readings will reassert itself in coming weeks,” said Brusuelas, a senior economist at Bloomberg LP in New York. “That being said, given the damage from the storm, a transitory downdraft in consumer comfort should be expected.”
In a separate report today, Labor Department figures showed the number of Americans filing first-time applications for unemployment benefits declined last week as the effects of Hurricane Sandy started to show up. Jobless claims dropped by 8,000 to 355,000 in the week ended Nov. 3.
Stocks rose as JPMorgan Chase & Co. paced a rally in financial shares. The Standard & Poor’s 500 Index gained 0.1 percent to 1,396.42 at 9:33 a.m. in New York.
The comfort index’s state of the economy gauge rose to minus 60.1 from minus 63.1 the previous week. The barometer measuring Americans’ views of their personal finances was little changed at minus 3.6 after minus 3.5 the previous week. The buying climate index decreased to minus 39.3 from minus 37.4 the previous week.
“The toughest economic recovery we have seen over the last several years appears to be finally gaining some traction with noticeable improvements in retail sales, consumer confidence, unemployment and housing market,” Steven Grimes, chief executive officer of Retail Properties of America Inc., a real estate investment service based in Oak Brook, Illinois, said on a Nov. 6 earnings conference call.
The rating on the U.S. economy has improved 11 percentage points in the past month and 17 points since a recent low on Aug. 19, today’s figures showed.
The pickup in confidence is coinciding with more household spending. Retail sales in September and August had the best back-to-back showing since late 2010. Purchases rose 0.8 percent in September, the biggest gain since February, after advancing 0.5 percent in August, the Commerce Department said on Oct. 29.
Progress in the labor market is also lifting Americans’ moods. Employers added 171,000 workers in October, more than forecast, the Labor Department reported on Nov. 2.
“Things are looking up, if I look at the job survey it’s looking better,” said Don Krueger, 60, from New York. Although he recently lost his job in the financial services industry, he is optimistic about his employment prospects and is making purchases.
“I’ll be spending money, fixing up my house, maybe doing a few real-estate transactions, taking advantage of some of the low prices right now,” said Krueger. “I’m pretty confident I’m going to get a job pretty quickly.”
In the week leading up to the election, the Bloomberg index among Democrats fell to minus 23.5 from minus 22.9 the previous week. Republican sentiment decreased to minus 39.6 from minus 37.8. Sentiment among Independents, or swing-voters, rose to minus 39.7, the highest since June, from minus 40.7 the prior week.
“There was a clear political element to economic views heading into the election,” with Democrats being the least pessimistic, said Gary Langer, president of New York-based Langer Research Associates, which compiles the index for Bloomberg. “In political terms, the index was in poor condition,” having been closer to levels previously associated with a loss by the incumbent or his party.
President Barack Obama prevailed over Republican Mitt Romney in an electoral sweep by carrying swing states such as Colorado, Ohio and Virginia.
Today’s figures showed sentiment among those working full-time and households earning more than $50,000 a year climbed to the highest levels since January 2008.
Sentiment may suffer a temporary setback due to Sandy, the Atlantic superstorm that hit the Northeast U.S. last week and caused widespread power outages, flooding and led to at least 100 deaths. The storm caused as much as $50 billion in economic damage, according to Eqecat Inc., a provider of catastrophic risk models.
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.