Consumer Comfort in U.S. Cools From Highest Level Since 2007

Consumer confidence cooled last week from an almost eight-year high as Americans took a less favorable view of their finances and the economy amid smaller gains in hiring.

The Bloomberg Consumer Comfort Index fell to 46.6 in the period ended April 12, from the prior week’s 47.9 reading that was the strongest since May 2007. The economic expectations gauge for April declined for a second month.

The comfort measure “hit a fresh pothole on its road to recovery,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in a statement. Recent “economic news is mixed, with weaker-than-expected job growth and payroll increases in March, but gains that have put the stock markets back near record highs.”

Hiring advanced in March by the least since December 2013 as businesses aligned headcounts with slower growth that reflects the strong dollar’s hit to exports and manufacturing, and a pullback in energy-related capital investment due to lower oil prices. Even so, stock-market gains and strong sentiment will sustain consumer spending, the biggest part of the economy.

The comfort index’s outlook gauge for April fell to 50, a five-month low, from 51.5. The share of households saying the economy is improving held at 30 percent and equaled the fraction believing its weakening.

The Bloomberg weekly comfort gauge remains well above last year’s average of 36.7, which was the best since 2007.

Among its three components, the measure of personal finances fell to 58.4 last week from 60.5. The index of Americans’ views on the state of the economy dropped to 37.7 from 39.5. A gauge of the buying climate, showing whether this is a good time to purchase goods and services, was little changed at 43.7 compared with 43.8 the prior week.

Income Disparity

Moods improved for Americans at the top of the wage scale and worsened for those at the bottom. The comfort gauge for workers earning $100,000 or more climbed to 71.9, its second-highest level since August 2007. For the under $50,000 category, it fell to 34.5 last week from 36.1. The 37.4-point gap is the second-biggest between the groups so far this year.

“Economic disparity is one of the challenges facing consumer sentiment,” Langer said in the statement.

Even as hiring cooled in March, sustained improvement in the labor market is allowing consumers to keep up their spending, which accounts for about 70 percent of the economy. While payrolls rose by a less-than-forecast 126,000 workers last month, the advance followed a 12-month streak of increases exceeding 200,000.

Stock Prices

Household finances are also getting help from gains in share prices as some corporate earnings come in better than anticipated and investors bet the Federal Reserve will be in no rush to begin raising interest rates. The Standard & Poor’s 500 Index is hovering around a record.

The Bloomberg Comfort Index has been presented on a scale of zero to 100 since May 2014, rather than the previous minus 100 to 100, with the midpoint shifting to 50 from zero. The change is also reflected in the gauge’s components. It doesn’t affect the measures’ relationship to each other or their correlation with other economic indicators. Historical data has been revised and analysis of trends, values and other variables also aren’t affected.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE