Consumer confidence decreased for the first time in four weeks as Americans’ views of the economy deteriorated to the lowest level since May.
The Bloomberg Consumer Comfort Index fell in the week ended Sept. 29 to minus 29.4 from minus 28.1. A measure of attitudes about the economy slumped as lawmakers failed to resolve their differences over the nation’s budget, culminating this week in a shutdown of the government that risks slowing the expansion.
“Political tensions that led to the current government shutdown, and the coming policy fight over the debt ceiling, are likely behind the decline in consumer comfort,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. A prolonged fight over the budget “carries significant risk to overall consumer and business sentiment.”
The first partial closure of the government in 17 years risks further rattling consumers’ moods at the same time the U.S. nears a deadline to raise the debt limit and avoid default. Nonetheless, the cheapest gasoline prices since January and improved home values are giving households the wherewithal to sustain spending, which accounts for 70 percent of the economy.
The comfort index registered its strongest quarter since 2007, as the measure reached a more than five-year high in early August. The gauge has averaged minus 16.3 since its inception in December 1985.
Another report today showed fewer Americans than forecast filed applications for unemployment benefits last week, indicating U.S. employers were maintaining staff counts in the days leading up to the government shutdown.
Jobless claims rose by 1,000 to 308,000 in the week ended Sept. 28, the Labor Department said in Washington. The median forecast of 50 economists surveyed by Bloomberg called for a rise to 315,000.
Stocks fell for a second day as investors weighed the jobless claims data and little progress from lawmakers on ending the federal shutdown. The S&P 500 lost 0.3 percent to 1,688.97 at 9:37 a.m. in New York.
The only component in the Consumer Comfort gauge to weaken last week was the gauge of Americans’ current views on the economy, which dropped to minus 57.8 from minus 52.5.
The buying-climate measure increased to minus 35 from minus 35.8 and the reading on personal finances climbed for a third straight week, to 4.5 from 4.
Falling prices at the gas pump provided some relief for households. The average cost of a gallon of regular-grade gasoline declined to $3.39 on Oct. 1, the lowest since Jan. 28, according to data from AAA, the nation’s largest auto group. Since the end of August, fuel prices have dropped 20 cents.
An increase in home prices from a year ago is also underpinning household finances. The S&P/Case-Shiller index of property values in 20 cities rose 12.4 percent in July from the same month in 2012, the biggest jump in more than seven years.
Even as households grow more optimistic about their personal finances, the first federal government shutdown in 17 years, at the same time the U.S. approaches the limit on its borrowing authority, has the potential to discourage spending and slow growth.
A shutdown lasting one week may reduce output by 0.1 percentage point, according to the median estimate of 40 economists in a Bloomberg survey. The negative effect is expected to accelerate the longer the shutdown persists.
“If this lingers for a while, it endangers the economic recovery at best,” Dave Barger, chief executive officer at JetBlue Airways Corp., said in an interview. “If this percolates into the psyche of business and everybody starts to back off travel spending and it can trickle down to others,” it will more problematic.
The auto industry may face a slowdown in shopper traffic, even with domestic carmakers on track to report their highest annual sales since 2007.
“If this thing drags out a couple of weeks, it starts to have more impact on customer sentiment and it starts to have a bigger impact on business,” Kurt McNeil, vice president of U.S. sales at General Motors Co., said on an Oct. 1 sales call.
Today’s confidence figures showed a growing gap between homeowners and renters, the second-widest in more than 16 months. The sentiment index among property owners climbed to minus 20.9 last week, the best in almost two months, from minus 21.4. Among renters the index fell to minus 46.9, the worst reading since February, from minus 42.4.
The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, 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.