Consumer Comfort in U.S. Drops on Fuel Costs

Press Release

The Bloomberg Consumer Comfort Index Was Minus 44.5 in the
Period to March 6

New York — Consumer confidence fell last week to the lowest
level in a month as surging gasoline prices soured Americans’
outlook about their finances and the economy.

The Bloomberg Consumer Comfort Index dropped to minus 44.5 in
the period to March 6, from the prior week’s minus 39.7, which
was close to the highest in almost three years. Sentiment
suffered the most among respondents who lacked a full-time job
or any employment and those earning less than $50,000 a year.

Gasoline costs have increased every day except one since mid-
February, dealing a financial blow to households just as the
labor market shows signs of improvement. The added burden of
higher prices at the pump may restrain the gains in consumer
spending that are bolstering the expansion.

For full CCI results, see: https://www.bloomberg.com/cci

“Rising gasoline prices extracted a toll,” said Joseph
Brusuelas, a senior economist at Bloomberg LP in New York.
“Those at the lower end of the income ladder and those in the
middle are being squeezed by rising costs of fuel and food,
which does not bode well for discretionary spending.”

A Labor Department report today showed claims for unemployment
benefits increased last week from an almost three-year low.
Applications rose by 26,000 to 397,000 in the week ended March
5. Economists projected claims would climb to 376,000, according
to the median forecast in a Bloomberg survey.

The Bloomberg comfort gauge reflected worsening results for all
three sub components.

The measure of personal finances fell to minus 3.7 last week,
from an almost two-year high of 2.4, the report showed. Forty-
eight percent of those polled held positive views on their
financial situation, down from 51 percent the previous week.

A gauge of Americans’ views of the economy fell to minus 76.8
last week from minus 70.6. The share of households with a
positive view of the economy dropped to 12 percent from 15
percent the prior week.

An index of the buying climate fell to minus 53, the lowest in a
year, from minus 50.9. Those people saying it was a good time to
buy needed items dropped to 24 percent from 25 percent the
previous week.

The average price of regular gasoline at the pump climbed 14
cents to $3.51 a gallon in the week ended March 6, according to
AAA, the nation’s biggest motoring organization. That followed a
gain of 20 cents in the prior period, which was the biggest one-
week jump since the aftermath of Hurricane Katrina in 2005.

“The repeated impact of forking over $50 or more per fill- up is
not to be underestimated,” Gary Langer, president of Langer
Research Associates LLC in New York, which compiles the index
for Bloomberg, said in a statement. “Gas is not the only
culprit,” he said, citing the average duration of unemployment,
which rose in February to the highest level in records going
back to 1948.

Gasoline prices and the comfort index have shown a strong
inverse correlation since 2004, according to calculations by
Bloomberg’s Brusuelas. Additionally, changes in the four-week
average of claims for jobless benefits have been in sync with
the comfort gauge about 72 percent of the time.

Macy’s Inc., the second-biggest U.S. department-store chain, is
among companies watching the rising cost of fuel, which “will
certainly affect some more than others,” said Chief Executive
Officer Terry Lundgren. The shopper with less discretionary
income “makes a decision of filling up (their) gas tank or
buying a handbag,” he said.

“The customer who has the average household income of $75,000,
$100,000, is back spending,” Lundgren said in the Cincinnati-
based company’s March 9 presentation to investors. “And the
customer who is well under that is spending even less than they
spent before.”

Today’s report showed the index for Americans earning $40,000 to
$49,900 a year fell to minus 51.5 last week, from minus 42.6 the
week before.

The comfort measure for part-time workers declined to minus
52.5 from minus 42.9, while for those who are unemployed it
dropped to minus 56.6 from minus 54.3.

Federal Reserve Chairman Ben S. Bernanke, in his semiannual
testimony before Congress last week, said sustained rises in the
prices of oil or other commodities “would represent a threat
both to economic growth and to overall price stability.”

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.

The responses are broken down by participants’ sex, age, income
level, race, region of residence, political affiliation, marital
and employment status.

Field work for the index is done by SSRS/Social Science Research
Solutions in Media, Pennsylvania.

Contact for Bloomberg:
Meghan Womack, +1 212-617-8514, mwomack4@bloomberg.net