Consumer confidence was little changed last week at a one-month low as Americans confronted having to pay holiday bills.
The Bloomberg Consumer Comfort Index held at minus 31 for the period ended Jan. 19. A drop in the buying-climate gauge that sent it to a two-month low was offset by rebounding attitudes on the current state of the economy.
An improving job market has yet to trigger the bigger gains in wages that will help sustain consumer spending after what may prove to have been its strongest quarter in three years. Stocks hovering close to record highs and rising home values are also helping buoy those at the upper end of the income scale.
“American households are growing confident in the durability of the recovery and the labor market, which will likely support sentiment despite the traditional post-holiday credit hangover,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The key to sustained improvement will be an increase in hiring that results in rising salaries, which is something that has been lacking.”
Another report today showed applications for unemployment benefits held near a six-week low, showing firings remain muted following the holidays. Jobless claims rose by 1,000 to 326,000 in the period ended Jan. 18, according to Labor Department data. The prior week’s 325,000 were the fewest since late November.
Stocks slumped as a report showed manufacturing in China unexpectedly contracted in January. The Standard & Poor’s 500 Index dropped 0.8 percent to 1,829.75 at 9:40 a.m. in New York.
Americans’ view of current economic conditions improved to minus 58.1 from a one-month low of minus 60.1 a week prior, today’s survey data showed. The gauge measuring consumers’ views on their personal finances was little changed at 1.8 from 2. The measure has been positive since late November.
The buying-climate index declined to minus 36.7, its lowest since November, from minus 34.9.
Rising property values may help sustain consumer sentiment. The S&P/Case-Shiller index of home prices in 20 U.S. cities climbed 13.6 percent in October from a year earlier, the biggest year-over-year gain since February 2006, according to a Dec. 31 report from the group.
Retail sales increased 0.2 percent in December after a 0.4 percent advance the month prior, Commerce Department figures showed last week. Excluding auto dealers, the 0.7 percent gain was the biggest in almost a year.
Auto sales grew 7.6 percent to 15.6 million in 2013, the industry’s strongest year since 2007.
“As long as the economy stays on track, we continue to see this modest recovery, housing continues to move forward, unemployment continues to improve, consumer confidence stays strong,” providing support for growth over the next one to three years, Craig T. Monaghan, president and chief executive officer of Duluth, Georgia-based auto retailer Asbury Auto Group, said at a Jan. 15 conference.
Consumer spending, which accounts for almost 70 percent of the economy, climbed at a 3.6 percent annualized rate in the fourth quarter, the best performance since the last three months of 2010, according to the median forecast of economists surveyed by Bloomberg this month. The data will be part of the report on gross domestic product that will be released on Jan. 30.
Economists also raised estimates this month for 2014 growth. The world’s largest economy will expand 2.8 percent this year, compared with the 2.6 percent forecast in December, according to the median estimate of economists in the Bloomberg survey conducted Jan. 10-15. This figure aligns with a growth projection from the International Monetary Fund in revisions to its World Economic Outlook released this week.
An improving job market is also part of the outlook. Economists surveyed projected payrolls will rise by about 200,000 workers per month in 2014, compared with 182,000 last year and 183,000 in 2012.
Fed policy makers will meet Jan. 28-29 to consider further reductions in monthly bond purchases, known as quantitative easing, which are meant to stimulate the recovery. They cited an improving job market at their December meeting when they voted to begin tapering this month.
Today’s report showed confidence declined last week among the nation’s lowest earners. The index of those making less than $15,000 a year fell to minus 68, the lowest in 11 weeks. While also down last week, a measure of sentiment for households making more than $100,000 was at 13.7.
Confidence among Republicans rose 3.8 points to minus 32.5, while that of Democrats declined 3.2 points to minus 29, its lowest level in three months. Last week, President Barack Obama signed a $1.1 trillion bill to finance the U.S. government through Sept. 30.
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.