Consumer Comfort Is Near 2014 Peak as U.S. Job Market Improves
Consumer sentiment held last week near the highest level of the year as Americans grew more upbeat about their personal finances and the economy.
The Bloomberg Consumer Comfort Index was 37.6 in the week ended July 20, up from 37.5 in the prior period. The measure reached a 2014 high of 37.9 in April. A gauge of personal finances climbed to 52.9, the highest in 11 weeks. Views on the economy improved slightly while a measure of the buying climate fell.
Buoyed by gains in employment, the stock market and home values, Americans are feeling better about spending, which accounts for about 70 percent of the economy. At the same time, stagnant wages are probably holding back consumer sentiment, which has failed to extend a rally that began in late May.
“Slower growth in inflation, easing gasoline prices, a still-rising stock market and positive results in home sales are part of the picture,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in a statement. “But long-term unemployment and slow income growth remain persistent threats.”
Another report today showed the number of Americans filing applications for unemployment benefits unexpectedly dropped last week to the lowest level in more than eight years.
Jobless claims fell by 19,000 to 284,000 in the week ended July 19, the fewest since February 2006, according to the Labor Department in Washington. Applications can be volatile at this time of year because of auto plant shutdowns, even as state data showed nothing inconsistent with prior years, a Labor Department spokesman said as the report was released.
Stocks rose as global data showed manufacturing strengthened and results from Facebook Inc. to Ford Motor Co. topped estimates. The Standard & Poor’s 500 Index advanced 0.1 percent to 1,989.53 at 9:35 a.m. in New York.
Today’s comfort report showed milestones among several groups. For married adults, the gauge reached 41.8, its best in more than six years. Sentiment among people with only a high-school education was 35.5, the best since March 2008.
The index among homeowners, at 41.2, was the highest since December 2007. Sales of existing homes reached an eight-month high in June as historically low interest rates and smaller price increases helped bring homeownership within reach for more Americans.
Nonetheless, the gap between the highest- and lowest-income Americans last week was one of its widest this year, with households earning $100,000 or more reaching 58.1 and those in the $15,000-and-less bracket coming in at 17.2. Those earning $50,000 and more showed the best reading since April.
That may help explain why retailers such as the Container Store Group Inc. (TCS) are struggling while automakers are having their best year since 2007.
“We’re experiencing a retail funk,” Kip Tindell, chairman and chief executive officer of the Coppell, Texas-based company, said on a July 8 earnings call.
“Consumers seem to be buying homes and automobiles and even high-ticket furniture, which has kind of been on the doldrums since the Great Recession,” Tindell said, while smaller-ticket retailers are seeing “more challenging sales suddenly.”
The gender gap also widened, with optimism rising to 42.1 for men, its best since early May, and falling to 33.4 among women, today’s report showed. That is the largest spread in almost three months.
Comfort among millennials and other young adults aged 18 to 34 fell to 39.9, the worst reading in two months.
A measure of buying climate was the only one of three components of the comfort index to lose ground last week, dropping to 33.3 from an almost three-month high of 34.7 in the prior period.
The comfort index for part-time employees declined to 37.2, the second consecutive drop after reaching a six-year high two weeks ago. Sentiment among full-time workers rose.
The Bloomberg Comfort Index has been presented on a scale of zero to 100 since May, rather than the previous minus 100 to 100, with the midpoint shifting to 50 from zero. The change is 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 have been revised and analysis of trends, values and other variables also have not been affected.
To contact the reporter on this story: Lorraine Woellert in Washington at firstname.lastname@example.org