Slide in U.S. Consumer Comfort Ends as Gasoline Prices Decrease
May 26th, 2011
The Bloomberg Consumer Comfort Index Was Minus 48.4 in the Period to May 22
New York — A monthlong slide in U.S. consumer confidence ended last week as gasoline prices retreated.
The Bloomberg Consumer Comfort Index rose to minus 48.4 in the period to May 22 from a nine-month low of minus 49.4 the prior week. Readings of minus 40 or less are generally associated with recessions and their aftermaths, the report said.
“The combination of a difficult labor market, falling housing prices and rising inflation has given the consumer a case of the blues that will not likely fade any time soon,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
For full CCI results, see: http://www.bloomberg.com/cci
A 12-cent decline in gasoline prices last week, the biggest drop since November 2008, may limit further strains on sentiment and help underpin consumer spending, which makes up 70 percent of the economy. At the same time, gains in wages have failed to keep up with the jump in prices, giving Americans little reason to cheer.
The rise in the comfort gauge last week was within the survey’s margin of error of 3 percentage points.
Other reports today showed the economy grew less than forecast in the first quarter, and the number of Americans filing first- time applications for unemployment benefits unexpectedly increased last week.
Gross domestic product expanded at a 1.8 percent annual rate, reflecting a smaller gain in consumer spending than previously calculated. Growth was the same as estimated last month by the Commerce Department and compared with a 2.2 percent increase forecast in a Bloomberg News survey of economists.
Jobless claims increased by 10,000 to 424,000 in the week ended May 21, according to the Labor Department. Economists had predicted a drop to 404,000.
Two of the three components of the Bloomberg comfort index gained last week, the figures showed.
The personal-finances gauge rose to minus 13.7 from minus 16.5 the previous week. The 2.8 percentage-point increase, the biggest improvement in two months, failed to make up for ground lost over the prior four weeks.
The buying-climate index increased to minus 55.8 from minus 56.1 the previous week.
A gauge of Americans’ views of the economy was minus 75.7, little changed from the previous week’s minus 75.6.
“The biggest concerns that I have on an ongoing basis are anything that impacts the consumer’s ability to buy discretionary items: gas, jobs,” said Ken Hicks, chief executive officer of Foot Locker Inc., the largest U.S. athletic shoe store chain. “As those stay up, that is a challenge.”
The two-year extension of Bush-era tax cuts President Barack Obama signed into law in December has helped consumers cope with higher food and energy costs, Hicks said during a May 20 conference call with analysts.
The average price of a gallon of regular gasoline nationally dropped to $3.84 on May 22, down from $3.96 seven days earlier, according to AAA, the nation’s largest auto club.
“Having prices go down undeniably is better than their going up,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “There may be relief in sight.”
Nonetheless, Langer said fuel prices were the highest on record during the month of May going back to 1990, when the U.S. Department of Energy began keeping record.
A housing market struggling to stabilize is also weighing on consumers’ spirits as home values fall alongside an unemployment rate that indicates more homeowners may risk defaulting on their mortgage payments.
The jobless rate climbed in April for the first time in five months, rising to 9 percent. It averaged 5.3 percent during the expansion that ended in December 2007.
Home prices dropped 5.5 percent in the first quarter from a year earlier, the biggest decline in almost two years, as sales of discounted foreclosures undermined real estate values, the Washington-based Federal Housing Finance Agency said yesterday.
The Bloomberg comfort index for consumers in the South fell for the fifth-consecutive week to the lowest level this year.
The index remained most negative in the West, where it rose from the lowest level since record-keeping began in 1990.
Comfort among unmarried Americans also fell to minus 61.1, the lowest level in more than a year, from minus 37 five weeks earlier.
A five-week period in which sentiment among Democrats was higher than Republicans also came to an end last week as the former lost confidence while the latter gained.
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three.
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. The margin of error for the headline reading is 3 percentage points.
Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania.
Kristin Swenson, +1 212-617-4264, email@example.com