Household confidence climbed last week to the highest level in seven months as Americans became less pessimistic about the economy.
The Bloomberg Consumer Comfort Index rose to minus 33.1 in the period ended Nov. 11 from minus 34.4 the previous week. The gauge has stayed above minus 40, the level associated with recessions and their aftermath, for two months. Twenty-two percent of those surveyed, the most since March 2008, had a positive view of the state of world’s largest economy.
More optimism along with faster job growth would improve the odds of a pickup in retail sales at the start of the holiday shopping season. The risk for consumer spending, which accounts for about 70 percent of the economy, is that the prospect of higher taxes tied to the so-called fiscal cliff prompts households to pull back.
“The long-awaited cyclical recovery in consumer sentiment is gathering momentum, which will likely continue along with what appears to be a quicker pace of labor-market improvement,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “One risk going forward is the fiscal cliff, which has not yet resulted in consumers increasing savings.”
The gauge of confidence has advanced in 10 of the past 12 weeks for the third time in data going back 26 years and is on pace to reach its highest annual average since 2007.
Another report today showed manufacturing in the New York region contracted for a fourth straight month in November as superstorm Sandy knocked out electrical power and limited activity.
The Federal Reserve Bank of New York’s general economic index was minus 5.2 this month after minus 6.2 in October. Readings of less than zero signal contraction in New York, northern New Jersey and southern Connecticut.
Sandy also wreaked havoc on the job market. Applications for jobless benefits surged by 78,000 to 439,000 in the week ended Nov. 10, the most since April 2011, the Labor Department said today in Washington. Several states said the increase was due to the storm that hit the Northeastern part of the U.S. in late October, a Labor Department spokesman said as the data were released to the press.
Stocks were little changed after the reports. The Standard & Poor’s 500 Index rose 0.1 percent to 1,357.29 at 9:35 a.m. in New York.
The comfort index’s state of the economy gauge increased to minus 56.6 from minus 60.1. The measure has climbed in 11 of the past 12 weeks, the best performance since late 1993 to early 1994.
The Bloomberg barometer measuring Americans’ views of their personal finances fell to minus 5.1 from minus 3.6 the previous week. The buying climate index increased to minus 37.6 from minus 39.3.
The recent gains in the weekly confidence measure coincided with the closing weeks of the presidential campaign.
“With the election finally behind us and the impact of the hurricane beginning to wane, consumers at last can begin to focus on the holiday shopping,” Jeffrey Siegel, chief executive officer of Garden City, New York-based Lifetime Brands Inc., the maker of Cuisinart food processors, said on a Nov. 8 earnings teleconference. With “consumer confidence relatively high, interest rates low, and gas prices somewhat stable, my overall sense is that consumers generally believe things are getting better.”
Improving sentiment may benefit retailers like Wal-Mart Stores Inc. and Macy’s Inc. during the holidays. Retail sales in the U.S. fell in October for the first time in four months as the effects of superstorm Sandy slowed business for some. August and September marked the best back-to-back retail sales showing since late 2010.
A budding housing recovery and cheaper gasoline are helping to shore up household wealth. The S&P/Case-Shiller index of home values in 20 cities rose 2 percent from August 2011, the biggest year-to-year gain since July 2010.
The average nationwide cost for regular gasoline was $3.44 on Nov. 11, down 34 cents from the end of September, according to data from AAA, the largest U.S. auto group. It reached a 2012 high of $3.94 on April 4.
The economy added 171,000 jobs in October, more than the 157,000 average of the year, the latest Labor Department data show.
Confidence among women rose to the highest level since April, today’s index showed. Sentiment among those 65 year or older reached the highest level since November 2007.
Sentiment among Republicans was little changed at minus 39.3 from minus 39.6 the previous week. The index for Democrats fell to minus 25.8 from minus 23.5. Confidence among Independents rose to minus 34.7 from minus 39.7 the prior week.
“Exit-poll data showed that a nearly identical percentage of voters rated the economy positively -- and they backed Obama by a whopping 90-9 percent margin,” said Gary Langer, president of New-York based Langer Research Associates, which compiles the report for Bloomberg.
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.