July 18 (Bloomberg) -- Consumer sentiment declined last week from a five-year high as Americans grew more pessimistic about the prospects for the world’s largest economy.
The Bloomberg Consumer Comfort Index fell to minus 28.4 in the period ended July 14, its first drop in five weeks, from minus 27.3 a week earlier. The monthly Bloomberg consumer economic expectations gauge fell to a five-month low of minus 5 in July from minus 1.
Higher prices at the gas pump and worker pay that is barely able to keep up with inflation weighed on consumer attitudes this month, as 28 percent, the fewest since September, said the economy was improving. What’s more, recent gains in the weekly comfort measure have been due to increases in sentiment among those who are better off financially rather than lower-income households.
“Despite modest employment gains, wage increases have remained relatively restrained,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The decline in overall assessments of economic conditions is a lagged response to the slowing of the economy, which is on track to grow barely above 1 percent in the first half of the year.”
The weekly measure of personal finances declined to its lowest level in more than a month, while the buying climate gauge held at its highest since the first week of May.
Another report today showed fewer Americans than forecast filed applications for unemployment benefits as the effects of auto-plant shutdowns began to ebb. Jobless claims dropped by 24,000 to 334,000 in the week ended July 13, the fewest since early May, Labor Department figures showed.
Stocks rose, putting the Standard & Poor’s 500 Index on pace for a record close, after the figures. The S&P 500 climbed 0.2 percent to 1,683.54 at 9:35 a.m. in New York.
The drop in the weekly comfort gauge reflected a further souring of attitudes about the economy, which deteriorated for a fourth week. The index fell to minus 55.3 from minus 54.5 the prior period. A reading of minus 51.2 five weeks ago was the highest since January 2008.
The gauge of finances fell to 3.6 from 6.1, while the buying climate index was unchanged at minus 33.5.
The drop in expectations this month is “a sign that even as current conditions improve, underlying weaknesses continue to dog the public’s economic confidence,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the comfort data for Bloomberg, said in a statement.
Jacksonville, Florida-based CSX Corp. the biggest railroad in the eastern U.S., said demand last quarter was generally positive.
“Looking at the key economic indicators, they continue to point to slow, steady growth in the U.S. economy,” Clarence Gooden, chief commercial officer of CSX Corp., said on a conference call yesterday. “Forward projections still show slow, steady growth for the second half.”
The Bloomberg confidence measure has foreshadowed changes in other measures of sentiment. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment unexpectedly decreased to a three-month low of 83.9 in July from 84.1 the month prior.
Today’s figures showed confidence among lower-income Americans continued to deteriorate. The index for households earning less than $15,000 fell to minus 69.2, its worst since January, from minus 66.6 a week earlier. For households earning more the $100,000, the index eased to 14.9 after 21 in the prior week, which matched the highest level since November 2007.
Among high-school graduates, the index dropped to minus 44.6, the lowest since February. That compares with minus 13.7 for college graduates.
Confidence among full-time workers declined for the first time in five weeks, falling to minus 9.3 from minus 7.7, which was the highest since November 2007. For part-time workers, the index rebounded to minus 40, the highest since late May, from minus 43.4.
Higher prices are taking a bigger bite out of American’s paychecks. Hourly earnings adjusted for inflation were unchanged in June after a 0.1 percent decrease the prior month, Labor Department figures showed this week.
The cost of living rose in June by the most in four months, the Labor Department also said. The consumer-price index increased 0.5 percent, spurred by higher gasoline costs.
The average price of a gallon of the fuel climbed to $3.67 yesterday from $3.49 at the end of June, according to figures from AAA, the nation’s largest motoring organization.
Consumers are being more deliberate in their spending as a result. Retail sales excluding purchases of automobiles were little changed in June, Commerce Department data showed earlier this week.
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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