Consumer Comfort in U.S. Climbs to an Eight-Month High

Consumer confidence in the U.S. climbed last week to the highest level in eight months as Americans’ views on the economy improved.

The Bloomberg Consumer Comfort Index rose to minus 31.9 in the period ended Dec. 16, from minus 34.5 in the prior week. The gauge is within a half point of a four-year high reached in April. Concerns about the future were evident in the monthly economic expectations gauge, also released today, which fell to zero in December from a nine-month high of 4 in November.

Gains in employment, a rebound in housing that’s boosting home equity, and lower gasoline prices are giving households reason to be upbeat during the holiday-shopping season. At the same time, an impending rise in taxes and cuts in government spending threaten to set back consumer optimism as the world’s largest economy enters 2013.

“Consumer sentiment, along with the economy, has stabilized at low levels likely reflecting improved labor and housing markets,” said Joseph Brusuelas, senior economist at Bloomberg LP in New York. A decline in after-tax income in 2013 “will likely weigh heavily on consumer sentiment going forward if policy is not changed.”

Other reports today showed the economy grew more than previously reported, and applications for jobless benefits rose. Gross domestic product expanded at a 3.1 percent annual rate in the third quarter, reflecting the first gain in state and local government spending in three years, more consumer purchases and a smaller trade gap, according to Commerce Department figures. The number of Americans filing first-time claims for unemployment insurance payments climbed to 361,000 in the week ended Dec. 15, the Labor Department reported.

Stocks were little changed after the figures. The Standard & Poor’s 500 Index climbed less than 0.1 percent to 1,436.33 at 9:35 a.m. in New York.

Comfort Components

All three components of the Bloomberg comfort index gained last week. The personal finances gauge rose to minus 0.8 from minus 4.6 the prior week, and the buying climate index climbed to minus 35.1 from minus 36.2.

The barometer measuring Americans’ views on the state of the economy advanced to minus 59.8 last week from minus 62.6. Thirty-three percent of respondents said the economy is in “poor” shape, the smallest share in almost five years.

The overall index was 13.1 points better than it was during the same period last year. In 2012, the gauge has averaged minus 38.4 and is on pace for its best annual showing in five years.

CEO Outlook

Scotts Miracle-Gro Co., the largest marketer of branded lawn-care products, is among companies closely monitoring swings in the consumers’ moods in this “low-growth environment,” according to Chief Executive Officer James Hagedorn.

“What we see right now is an extremely fragile consumer,” Hagedorn said in a Dec. 14 presentation to analysts. “When things line up right, consumer confidence improves and they open their wallets.” At the same time, “when consumers get stressed today, they shut down.”

Today’s figures showed confidence among those earning $50,000 to $75,000 jumped last week to minus 12.6, a five-year high, from minus 27.7 the prior week. Sentiment among Americans with annual income of $100,000 or more climbed to 8.9, remaining positive for a seventh consecutive week.

Growth in employment is underpinning consumers’ perceptions that the economy is improving. Payrolls increased by 146,000 workers in November, the most since August.

Housing Recovery

In a sign the housing-market recovery will extend into 2013, the number of building applications issued in November rose to a four-year high, data showed yesterday. Permits, a proxy for future construction, climbed 3.6 percent to an 899,000 annual rate, the most since July 2008.

Cheaper fuel also is bringing relief. A gallon of regular gasoline dropped to $3.23 on Dec. 18, the cheapest this year, figures from the American Automobile Association showed.

Improving confidence bodes well for the holiday season, the busiest time of the year for retailers. Retail sales climbed 0.3 percent in November, with 10 of 13 major categories showing gains, according to Commerce Department data released Dec. 13.

Today’s report contrasts with some other measures of confidence. The Thomson Reuters/University of Michigan preliminary consumer sentiment index decreased to 74.5 this month from 82.7 in November, figures showed Dec. 7.

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.


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