Consumer Comfort in U.S. Rose Last Week on Boost in Finances
Consumer confidence in the U.S. rose last week as households became more upbeat about the state of their finances and optimism climbed among wealthier Americans.
The Bloomberg Consumer Comfort Index increased to minus 43.9 for the period ended July 10 from minus 45.5 the prior week. Even with the gain, which is within the survey’s 3-point margin of error, the gauge is lower than it was at the start of the year.
While cheaper gasoline prices since May helped stabilize optimism, Americans’ assessment of the U.S. economy soured to a 15-week low. The pessimism likely reflects employment gains in June that were the smallest in nine months, a possible risk to consumer spending that accounts for about 70 percent of the world’s largest economy.
“Consumers are feeling a little bit better about the fact that gasoline prices have come down materially over the last several weeks,” said Russell Price, a senior economist at Ameriprise Financial Services Inc. in Detroit. “But on the other side of the coin, the lack of any real traction in job growth” is also weighing on consumers.
An index of consumers’ views of the economy dropped to minus 83.3, the lowest level since the end of March, from minus 80.9 the prior week. Eight percent of consumers, the fewest since March, rate the economy positively, according to today’s report.
“Households report that they have little confidence in the durability of the recovery and about their own income prospects,” Federal Reserve Chairman Ben S. Bernanke told Congress yesterday.
Central bankers are prepared to use policy measures to address economic weakness that could “prove more persistent than expected,” Bernanke said.
A report today showed the recent weakness in the labor market may be starting to abate. Initial jobless claims fell by 22,000 to 405,000 last week, the lowest level since April, the Labor Department said in Washington. The data included fewer layoffs in the auto industry than typical this time of year, according to an agency spokesman.
On July 8 that showed U.S. employers added 18,000 jobs in June, while the unemployment rate climbed to 9.2 percent.
Sales at U.S. retailers stagnated in June as rising unemployment held consumers back, another report showed today. The 0.1 percent increase reported by the Commerce Department in Washington today compared with the median forecast of a 0.1 percent drop in the Bloomberg News survey of 80 economists. Excluding auto sales, purchases were little changed, the weakest performance since July 2010.
Stocks rose for a second day after the reports. The Standard & Poor’s 500 Index climbed 0.1 percent to 1,319.14 at 11:10 a.m. in New York.
Even as consumers’ sentiment about the economy waned, they became more optimistic about their own finances. The gauge of personal finances increased to minus 1.6, the highest level in 12 weeks, from minus 8.4. The buying climate measure rose to minus 46.7, the highest level since the end of January, from minus 47.1 the prior week.
The index also showed “faint signs of life” among higher- income Americans, “underscoring the economic divide in consumer views,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.
Confidence among Americans making more than $100,000 climbed to minus 1.4, the highest level since May 8, while optimism fell among households making less than $25,000.
Sentiment among college graduates improved to minus 27.8, while confidence among high school graduates fell to minus 58.4.
Confidence among consumers with a full-time job rose slightly to minus 32.3 from minus 32.6 the week before, while optimism among consumers working part time decreased to minus 45.6 from minus 40.6 the prior week.
The struggling labor market may be prompting households to cut back. Consumer spending stagnated in May, the Commerce Department reported on June 27.
Patrick Lavelle, chief executive officer of Audiovox Corp. (VOXX), which makes automotive and consumer electronics, said lagging consumer confidence is keeping retailers cautious.
“We see a lack of confidence with the consumer and that obviously is something that we have taken into consideration,” Lavelle said on a July 12 conference call with analysts. “With unemployment still north of 9 percent, we don’t see that changing much.”
Audiovox, a Hauppauge, New York-based manufacturer, reported a first-quarter decline in sales in its consumer accessories group.
The Bloomberg consumer comfort index has averaged minus 44.7 this year, compared with minus 45.7 for all of 2010 and minus 47.9 in 2009, the year the last recession ended, the report showed.
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 U.S. residents age 18 and over. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate. Results are combined with data from the previous three weeks, and the percentage of negative responses is subtracted from the share of positive views on each question, with the results then averaged.
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.
Field work for the index is done by Social Science Research Solutions in Media, Pennsylvania.
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