Consumer confidence cooled last week from its highest level in more than five years as Americans’ views on the economy, personal finances and spending receded.
The Bloomberg Consumer Comfort Index fell to minus 26.6 for the period ended Aug. 11, its first drop in four weeks. The reading was the second-strongest since January 2008, behind the prior week’s minus 23.5.
The decline illustrates that gains in confidence remain fragile, and may be reversed should interest rates keep rising or fuel costs jump. At the same time, rising property values and stock prices are bolstering Americans’ personal wealth, supporting consumer spending, which accounts for 70 percent of the world’s largest economy.
“Rising interest rates and a slower pace of job gains add to concerns of households that are still facing, at best, restrained job growth,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
All three components of the comfort index weakened last week, with the measure of personal finances falling to its lowest level in more than two months. Nonetheless, the gauge has been positive since mid-April.
Other reports today showed jobless claims last week dropped to the lowest level in almost six years, consumer prices rose in July for a third month and manufacturing production declined last month.
Stocks dropped today as the reports fueled speculation the Federal Reserve will trim monthly asset purchases this year. The Standard & Poor’s 500 Index declined 1 percent to 1,668.45 at 9:40 a.m. in New York.
The Bloomberg comfort index has anticipated changes in other measures of sentiment, reaching a five-year high in mid-April, a month before the Thomson Reuters/University of Michigan gauge. The Conference Board’s confidence index declined more than forecast in July to 80.3 after reaching a five-year high of 82.1 a month earlier.
Consumers also had a less optimistic view of the state of the economy last week, as the Bloomberg measure dropped to minus 47.2, the second-highest since January 2008, from minus 45.1 the prior week.
The index of Americans’ views of their personal finances declined to 3.2, the lowest since the period ended June 9, from 6.6. The measure has been positive for 18 consecutive weeks. A gauge of the buying climate decreased for the first time in three weeks to minus 35.8 from minus 32 as fewer consumers said the time was right to buy needed items.
“So goes the pattern of recovery -- slow, weak and uneven, but recovery,” said Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg.
Labor Department data earlier this month showed uneven improvement in the job market as employers added fewer workers than forecast in July, while the jobless rate fell to a four-year low as more Americans found part-time positions. Payrolls rose by 162,000, the least in four months, and unemployment fell to 7.4 percent from 7.6 percent.
Retail sales increased in July for a fourth consecutive month, climbing 0.2 percent following a 0.6 percent gain the month prior, according to Commerce Department data earlier this week.
Today’s figures showed consumers at the very top of the income scale were becoming more exuberant. For households earning more than $100,000, the index was positive for the 28th straight week, jumping to 22.1, the highest since November 2007, from 18.3 the prior period.
The measure for households earning less than $15,000 improved for a fourth week to reach minus 47.7, the highest since March, from minus 53.1. At the same time, confidence dropped among every other income group. For households earning between $15,000 and $25,000, the index declined to minus 52.1 from minus 39.4.
Macy’s Inc., the second-largest U.S. department-store chain, said a second-quarter profit that was weaker than analysts expected signals a lack of momentum in the economy.
“Our performance in the period, in part, reflects consumers’ continuing uncertainty about spending on discretionary items in the current economic environment,” said Terry Lundgren, chief executive officer of the Cincinnati-based company, in a statement yesterday.
Macy’s chief financial officer Karen Hoguet on an earnings call yesterday said, “We believe that much of our weakness is due to the health of the consumer and the fact that consumers seem to be choosing to make purchases in non-department stores categories such as cars, housing and home improvement.”
The gap in sentiment between renters and homeowners widened last week, as did the one between full-time and part-time workers. The index for renters declined for the first in five weeks to minus 34.8 from minus 28.1. Confidence among homeowners cooled after a one-week improvement to minus 21.9 from minus 20.5.
Sentiment among full-time workers fell to minus 15.1, the lowest in two months, from minus 11.5 the week prior. The index among those employed part-time decreased to minus 38.5, the weakest in more than a month, from minus 27.9.
After reaching its highest level since January 2008, confidence among woman declined to minus 36, erasing almost all the previous week’s gains, from minus 29.9. The outlook among men improved to minus 16.5, the second-highest since January 2008, from minus 16.6.
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 margin of error for the headline figure is 3 percentage points. 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.