April 4 (Bloomberg) -- Confidence among U.S. consumers stabilized last week, stemming a pullback in sentiment that had threatened to check recent gains in spending.
The Bloomberg Consumer Comfort Index increased to minus 34.1 in the week ended March 31 from a six-week low of minus 34.4 in the prior period. The gain was within the margin of error of 3 percentage points. Measures of the state of the economy and buying climate improved.
The comfort readings from January through March were the strongest on average of any first quarter since 2008 as a pickup in hiring and record stock prices helped consumers overcome an increase in the payroll tax. The Labor Department’s employment report tomorrow will probably set the near-term tone for household spending as Americans wait to see if federal budget cuts are damaging the economy.
“Consumer sentiment is likely to experience a period of moderate retrenchment because of more pronounced job losses due to sequestration and the lagged impact of tax hikes,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
More Americans than projected filed applications for unemployment benefits last week, reflecting the difficulty the government has adjusting the figures around the Easter holiday and spring break at schools, another report showed today.
Jobless claims rose by 28,000 to 385,000 in the week ended March 30, the highest since Nov. 24, according to Labor Department figures. The median forecast of 47 economists surveyed by Bloomberg called for a drop to 353,000.
Stocks were little changed, with the Standard & Poor’s 500 Index increasing 0.1 percent to 1,555.63 at 9:39 a.m. in New York. Treasuries rose, with 10-year note yields briefly touching a three-month low of 1.76 percent.
The comfort index’s measure assessing Americans’ views on the current state of the economy climbed to minus 60.6 from minus 61.1 following four straight declines.
The buying-climate index improved to minus 40.7 from minus 41.7 the prior week. Thirty percent said it was a good time to buy things that they want or need, up from 29 percent last week.
By contrast, the gauge of personal finances fell to minus 0.9 last week, its lowest level since early February, from minus 0.5 the prior period.
An unexpected rebound at the end of March put the Thomson/Reuters University of Michigan’s consumer sentiment index more in line with the Bloomberg comfort gauge. Michigan’s measure jumped to 78.6 last month from a preliminary reading of 71.8, the group reported last week. It was now little changed from February’s 77.6, erasing the previously reported decline.
Confidence is making little headway as it’s buffeted by cross currents. Gains in hiring, rising stocks and an improving housing market are undergirding attitudes just as the levy that funds Social Security reverted at the start of the year to its 2010 level of 6.2 percent from 4.2 percent. Workers earning $50,000 take home about $83 less a month.
Unemployment fell to 7.7 percent in February, the lowest in four years, from 7.9 percent in January, and the economy added 236,000 jobs, Labor Department reported last month. March numbers are due tomorrow, and economists surveyed by Bloomberg estimate the jobless rate held at 7.7 percent and payrolls climbed by 190,000.
The Standard & Poor’s 500 Index has gained 8.9 percent this year through yesterday, and closed at a record high of 1,570.25 on April 2.
A housing recovery is also helping restore household net worth. Home prices rose 10.2 percent in the 12 months through February, the biggest increase in seven years, according to data from Irvine, California-based CoreLogic Inc.
Strengthening consumer confidence would signal spending on autos and other big-ticket items will continue to improve, making companies including Ford Motor Co. more optimistic.
“The outlook has improved in terms of the employment growth and income gains,” Jenny Lin, Ford’s senior economist for the Americas, said on an April 2 sales and revenue call. “The buying appetite for houses and consumer durables remain actually very favorable.”
Among households earning $50,000 to $75,000 a year, comfort rose to minus 10.6, its highest level since December 2007, from minus 23.2, according to today’s report.
Conversely, sentiment among those earning less than $15,000 dropped 7.8 points to its lowest level in almost two months. Confidence for this group had climbed 35 points from January through mid March.
Confidence improved in three of four regions of the country last week, falling only in the West.
Men were at their most optimistic in almost a year, and women were at their most pessimistic since mid-January. Confidence among adults between 55 and 64 years old retreated to its lowest since early October.
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.
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