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Comfort Index Climbs as U.S. Economy Views Reach Five-Year High

Consumer confidence rose last week as an improving job market helped make Americans the least pessimistic about the economy in more than five years.

The Bloomberg Consumer Comfort Index improved to minus 27.3 in the seven days ended July 21, matching its highest level since January 2008, from minus 28.4 the prior period. The measure tracking perceptions about the world’s biggest economy posted its biggest advance since September 2008.

Rising home and equity values this year have brightened consumers’ moods, which may help propel spending following a lull last quarter. The increase in confidence last week was broad-based with six of seven income brackets showing gains, indicating gains in employment are making households more convinced the economic expansion will be sustained.

“What we’re seeing here is consumer sentiment continuing to move in a tight range likely based on Americans’ perceptions of growing job security,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.

Stocks fell, with the Standard & Poor’s 500 index declining for a third day, as investors weighed corporate earnings. The S&P 500 declined 0.3 percent to 1,681.53 at 9:33 a.m. in New York.

A report today showed the number of Americans who filed for unemployment benefits rose last week as annual auto-plant shutdowns continued to affect the data. Initial jobless claims climbed by 7,000 to 343,000 in the period ended July 20, the Labor Department said.

Durable Goods

Orders for durable goods climbed more than forecast in June, another report from the Commerce Department showed. Bookings for goods meant to last at least three years increased 4.2 percent, led by transportation equipment, after a revised 5.2 percent gain in May that was bigger than initially reported. The median forecast of 79 economists surveyed by Bloomberg called for a 1.4 percent advance. Unfilled orders for big-ticket goods rose the most since December 2007.

Americans showed increased confidence in the state of the economy, with the measure reaching minus 50.5, the strongest reading since January 2008, from minus 55.3 the period before.

Improved views on the economy “are key for further advances in consumer sentiment, given that they’re so much bleaker than ratings of personal finances or the buying climate,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the comfort data for Bloomberg, said in a statement.

Personal Finances

A measure of personal finances increased to 4.3 from 3.6 the week before, leaving the gauge 6.5 points below its long-term average since 1985. An index of buying conditions eased to minus 35.8 last week from minus 33.5.

An improving employment picture and historically low borrowing costs are supporting U.S. home sales, boosting consumers’ perception of their wealth as home values rise.

Purchases of new houses climbed 8.3 percent to an annualized pace of 497,000 homes, the highest level since May 2008, the Commerce Department said yesterday. The median selling price of a new home appreciated 7.4 percent to $249,700 last month from $232,600 in June 2012.

Positive trends in the housing market are translating into gains for companies such as Whirlpool Corp., the world’s largest appliance maker, which raised its earnings forecast for the year amid expectations for better growth in the industry.

Demand Improving

“We see demand for replacement purchases as well as improving consumer confidence,” Marc Bitzer, president of Whirlpool North America, said in a July 19 conference call to discuss second quarter earnings. “Therefore, we expect continued growth as we progress throughout the year.”

Rising mortgage rates and increasing gas prices may temper future gains in consumer sentiment. Mortgage applications in the U.S. fell for a sixth straight week in the period ended July 19, the Mortgage Bankers Association index showed yesterday, while the cost of a gallon of regular gasoline averaged $3.67 on July 21, near the highest level in four months, according to figures from AAA, the largest U.S. motoring group.

Confidence among men rose to minus 16.6 last week, its highest since January 2008, from minus 20.7, according to today’s report. Sentiment among women declined to minus 37.3, the worst reading since April, from minus 35.6 in the prior period.

The disparity between the sexes matched its widest since the last week of 2011, and may reflect what has been a widening income gap in the comfort index as median incomes for women tend to be lower than for men, Langer said.

Income Groups

For households earning more the $100,000, the index was positive for a 25th straight week, rising to 18.8 from 14.9 in the prior week. The measure for households earning less than $15,000 improved to minus 66.2 from minus 69.2 a week earlier, its worst reading since January. Those making from $75,000 to $99,900 were the only ones to lose confidence last week.

Comfort among married adults last week was the strongest since January 2008, with the reading rising to minus 17.6 from minus 20.4. The index for renters improved to minus 36 from minus 40.2 the week before.

The Bloomberg Consumer Comfort Index conducts telephone surveys with a random sample of 1,000 consumers ages 18 and older. Each week, 250 respondents are asked for their views on the U.S. 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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