July 3 (Bloomberg) -- Consumer sentiment climbed last week to its highest level in more than five years as Americans became increasingly convinced the time was right to spend.
The Bloomberg Consumer Comfort Index rose to minus 27.5 in the period ended June 30, its highest level since January 2008, from minus 28.3 a week earlier. Measures of personal finances and buying climate gained.
Higher home values and improvements in the labor market are helping boost demand for housing and automobiles as consumers gain confidence the expansion will continue. The figures indicated households are looking past a recent jump in borrowing costs as the economy recovers and fuel costs retreat.
“Declining gasoline prices and the boost from modest income gains appear to be offsetting for the current time volatility in equity markets,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The key to sustained improvement going forward will be an acceleration in hiring and easing of energy prices, which bolster household discretionary spending despite restrained wage growth.”
Other reports today showed companies boosted employment in June, fewer workers filed claims for unemployment benefits last week and the trade gap unexpectedly surged in May.
Payrolls at U.S. companies climbed by 188,000 workers in June, exceeding the median forecast in a Bloomberg survey, following a 134,000 gain the prior month, figures from the Roseland, New Jersey-based ADP Research Institute showed. Jobless claims decreased by 5,000 to 343,000 in the week ended June 29, the Labor Department said.
The gap between exports and imports widened to $45 billion in May, the biggest since November, according to figures from Commerce Department. The 12.1 percent increase in the deficit from April was the biggest one-month gain in two years.
The Standard & Poor’s 500 Index fell 0.4 percent to 1,607.97 at 9:40 a.m. in New York, and oil prices climbed, amid mounting political unrest in Egypt.
The Bloomberg index has foreshadowed changes in other measures. The Conference Board’s gauge in June rose to its highest level since January 2008, exceeding all forecasts in a Bloomberg survey, a report showed last week.
Higher-income Americans are seeing the biggest improvement in confidence. The index for households earning from $75,000 to $100,000 jumped to 14.8, its highest since November 2007, from 9.6 the week prior. The outlook improved for households earning more than $100,000 a year, rising to 18.9, the third-highest level since November 2007, from 14.8.
The advance in the consumer index was driven by a more optimistic view on shopping, with the buying climate index rising to minus 34.9 from minus 37.4 a week earlier as more households said the time was right to purchase things.
A gauge on American’s views on personal finances also improved to 4.4 after holding at 3.8 for two weeks. The measure of how Americans view the current state of the economy declined for a second week to minus 51.9 from minus 51.3. A reading three weeks ago of minus 51.2 was the highest since January 2008.
The housing market is probably accounting for some of the improved optimism. The S&P/Case-Shiller index of property values in 20 cities increased 12.1 percent in April from the same month in 2012, the biggest year-over-year gain since March 2006, a report last week showed. Purchases of new homes jumped in May to five-year high, figures from the Commerce Department also showed last week.
The confidence index was minus 21.3 among homeowners, its second-highest since January 2008, from minus 24 a week prior. The outlook among renters declined for the first time in seven weeks to minus 38.2 from minus 36.5, which was the highest since March 2008.
Automotive companies such as General Motors Co. and Ford Motor Co. have benefited as residential property values and stock prices spur demand. Ford sales of cars and light trucks gained 13 percent in June, and GM’s rose 6.5 percent, both exceeding analysts’ estimates, data showed yesterday. Industry wide, purchases climbed to a 15.9 million annualized rate, the most since November 2007, according to Ward’s Automotive Group.
Replacement demand and “historically low interest rates irrespective of the conversations surrounding the Fed” are fueling continued growth for the auto industry, Ken Czubay, Dearborn, Michigan-based Ford’s vice president of U.S. marketing, sales and service, said on a conference call yesterday. “The tailwinds continue to be strong” and are “pretty forceful,” he said.
Full-time workers were the least pessimistic since November 2007, with their comfort index rising to minus 8.7 from minus 9.7, today’s report showed.
Today’s report indicates confidence is growing on both sides of the political spectrum. Republicans last week were the least pessimistic since November 2008 when Barack Obama was first elected president. Sentiment among registered Democrats hovered near a 12-year high.
“The bipartisan nature of improving consumer confidence raises the odds that the rally, now 12 weeks old, may have staying power,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the comfort data for Bloomberg, said in a press release.
The survey does point to some socioeconomic disparity in the recovery. The gap between men and women is its largest since January 2012 and between married and single adults, its largest since May 2012. The gap between full-time and part-time workers was its largest since December 2011 in the week prior. The outlook for part-time employees increased for a second straight week to minus 40.8 from minus 42.7.
The Bloomberg Consumer Comfort Index 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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