Consumer Comfort in U.S. Hovers Near Highest Since 2008

Consumer Comfort in U.S. Hovers Near Strongest Since March 2008
Higher property values and record-low borrowing costs are supporting a real-estate recovery that’s bolstering household confidence. Photographer: Sam Hodgson/Bloomberg

Consumer confidence in the U.S. held near a four-year high last week as Americans grew less pessimistic about the economy.

The Bloomberg Consumer Comfort Index was little changed at minus 32.1 in the period ended Dec. 23 from minus 31.9 in the prior week, a drop that was within the margin of error of 3 percentage points. The gauge was less than a point from an April reading that was the highest since March 2008.

Higher property values and record-low borrowing costs are supporting a real-estate recovery that’s bolstering household confidence while cheaper gasoline offers some relief to pocketbooks. At the same time, looming tax increases and government budget cuts threaten to keep sentiment and spending from accelerating.

“Households are increasingly confident about their own personal finances, which is likely to sustain the improvement in consumer sentiment in 2013, albeit at low levels,” said Joseph Brusuelas, senior economist at Bloomberg LP in New York. “This is part and parcel of the historically slow expansion the U.S. is currently experiencing.”

Figures from the Labor Department today showed fewer Americans than forecast filed claims for unemployment insurance last week as state offices rushed to tally the data in a holiday-shortened period. Jobless claims dropped by 12,000 to 350,000 in the week ended Dec. 22.

Stocks fell as lawmakers return to Washington to resume budget talks. The Standard & Poor’s 500 Index dropped 0.1 percent to 1,418.17 at 10:12 a.m. in New York.

Conference Board

The Bloomberg measure contrasts with the Conference Board’s gauge of consumer confidence, which declined more than forecast in December. The New York-based private research group’s index dropped to 65.1 from a revised 71.5 reading the prior month. The gauge was projected to fall to 70, according to the Bloomberg survey median.

The Conference Board’s gauge of expectations for the next six months decreased to 66.5, the lowest since November 2011, from 80.9. The measure of present conditions climbed to 62.8 this month, the highest since August 2008, from 57.4 in November.

“The sudden turnaround in expectations was most likely caused by uncertainty surrounding the oncoming fiscal cliff,” Lynn Franco, director of economic indicators at the Conference Board, said in a statement today. “While consumers are quite negative about the short-term outlook, they are more upbeat than last month about current business and labor market conditions.”

New-Home Sales

The Commerce Department said in another report that sales of new homes rose in November to the highest level in more than two years, the latest sign that the real-estate market is helping lift the economy. Purchases climbed 4.4 percent to a 377,000 annual pace, the most since April 2010, following a revised 361,000 rate in October.

The Bloomberg measure of Americans’ views of the state of the economy climbed to minus 58.5, the second-highest level since March 2008, from minus 59.8 the prior week. The personal finances gauge rose to minus 0.5 from minus 0.8.

The buying climate index decreased to minus 37.5 compared with minus 35.1 in the previous period.

The overall index was 15.4 points better than it was during the same period last year. The gauge has averaged minus 38.3 in 2012 and is on track for its best annual showing since 2007.

Political Groups

Democrats showed their highest confidence reading for a comparable week since 2006. Independents registered their strongest sentiment since April, and highest level for a similar period since 2007. Confidence among Republicans slid last week to the lowest among the three political groups, and was last higher for a comparable week in 2010 when the party scored its biggest victory in the U.S. House of Representatives since 1938.

Today’s figures showed confidence among those 45 to 54 years old advanced last week to its highest level since the week ended April 29. Sentiment among Americans with annual income of $100,000 or more remained positive for an eighth consecutive week, the longest such stretch since the 13 weeks ended June 17.

Employment gains may be helping boost consumers’ perceptions that the economy is improving. Payrolls increased by 146,000 workers in November, the most since August. Employment rose at a similar pace this month, according to the median estimate in a Bloomberg survey before next week’s figures from the Labor Department.

Sentiment among part-time workers improved in the Bloomberg survey to a five-month high, today’s report showed.

Bright Spot

Housing remains a bright spot in the economic recovery. Property values increased more than forecast in October, according to a report released yesterday by the S&P/Case-Shiller group. The index of home prices in 20 cities rose 4.3 percent from October 2011, the biggest 12-month advance since May 2010.

Cheaper gas prices are easing stress for household balance sheets. The average cost of a gallon of regular gasoline at the pump fell to a 12-month low of $3.22 on Dec. 19, according to AAA, the nation’s biggest motoring organization.

The pickup in confidence may not be translating to better results at retailers. Purchases rose 0.7 percent from Oct. 28 through Dec. 24 compared to 2 percent in the same period last year, according to a Dec. 25 report from MasterCard Advisors SpendingPulse, which tracks total U.S. sales at stores and online via all payment forms.

“We’ve had some ups and downs in terms of the general economy,” Chuck Knight, senior vice president and corporate controller at Wayne, New Jersey-based Toys R Us Inc., said on a Dec. 18 earnings call.

Telephone Survey

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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