Consumer Comfort in U.S. Improves to Highest Level This Year

Confidence among U.S. consumers improved last week to the highest level this year as the housing recovery and recent gains in stocks removed some of the sting from higher payroll taxes.

The Bloomberg Consumer Comfort Index climbed for a fourth straight week, reaching minus 32.8 in the period ended Feb. 24 from minus 33.4 in the prior period. The share of Americans with a positive view of the world’s largest economy matched the highest since March 2008.

Rising residential real-estate values, combined with stock prices close to five-year highs, are speeding a rebound in household wealth that will help underpin spending. Nonetheless, the highest gasoline prices in four months and disagreement among lawmakers on how to close the federal budget deficit may check the recent gains in sentiment.

“Thus far, most Americans appear to be blissfully unaware, much like they were regarding the tax hikes at the beginning of the year, of the risk due to a greater fiscal drag on growth,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Rising gasoline prices and policy tensions are likely to weigh on sentiment going forward over the next several weeks.”

Another report today showed fewer Americans than forecast filed applications for unemployment benefits last week, indicating companies were looking beyond looming government spending cuts and maintaining staffing.

Jobless claims decreased by 22,000 to 344,000 in the holiday-shortened week that ended Feb. 23, the Labor Department reported today in Washington. The median forecast of 44 economists surveyed by Bloomberg called for 360,000 applications. The number of people collecting unemployment insurance dropped to the lowest level since June 2008.

Fourth Quarter

Another report showed the economy in the U.S. barely expanded in the fourth quarter, erasing a previously estimated contraction, as the smallest trade deficit in almost three years helped overcome the biggest plunge in defense spending since the Vietnam War era. Gross domestic product grew at a 0.1 percent annual rate, up from a previously estimated 0.1 percent drop, revised figures from the Commerce Department showed today in Washington.

Stocks were little changed after the reports. The Standard & Poor’s 500 Index rose 0.1 percent to 1,517.38 at 9:37 a.m. in New York.

The Bloomberg gauge assessing Americans’ views on the current state of the economy rose for a fifth straight week, to minus 56.9 from minus 58.3. Twenty-two percent had a positive view of the economy, matching a November reading that was the highest since March 2008.

Buying Climate

The buying-climate index improved to minus 41.3, the highest this year, from minus 42 the prior week. The comfort index’s measure of personal finances was little changed at minus 0.1 compared with 0.1 in the prior period.

Attitudes on the economy may be reflecting the rebound in the housing market. New-home sales surged 15.6 percent to a 437,000 annual pace in January, Commerce Department figures showed Feb. 26. Purchases of previously owned properties advanced 0.4 percent during the month, according to National Association of Realtors data.

The pickup in demand is helping home prices recover. The S&P/Case-Shiller index of property values in 20 U.S. cities increased 6.8 percent in December from the same month in 2011, the biggest year-to-year gain since July 2006.

Improving job prospects may also be brightening consumers’ moods. Employers hired a net 157,000 workers last month following revised gains of 196,000 and 247,000 in December and November that were bigger than initially estimated, Labor Department figures show.

Lowe’s Cos.

Stronger housing and job markets may help improve the outlook for companies such as Lowe’s Cos., the second-largest U.S. home-improvement retailer behind Home Depot Inc.

“The fundamentals underlying drivers of industry growth -- mainly job gains and stable to growing housing -- should support a strengthening growth trajectory for the industry,” Robert Niblock, chief executive officer of Lowe’s., said on a Feb. 25 earnings call.

At the same time, limited income growth and a reluctance among consumers to finance purchases are the “primary drivers influencing their decision” for delaying projects, he said.

The payroll tax this year was allowed to return to its 2010 level of 6.2 percent from 4.2 percent. An American who earns $50,000 is taking home about $83 less a month.

Higher fuel costs may also be thwarting bigger gains in spending. The price of a gallon of regular gasoline has climbed about 57 cents since last year’s low of $3.22 reached on Dec. 19, according to figures from AAA, the largest U.S. motoring organization.

Challenged Consumer

“The consumer continues to be challenged with an uncertain unemployment outlook, higher (payroll) taxes and increasing gas prices,” Sandra Cochran, chief executive officer at Cracker Barrel Old Country Store Inc., said during on a Feb. 26 earnings call. The brand’s casual, country-themed restaurants and gift shops operate throughout the U.S.

Today’s report showed confidence among those who are unemployed rose to minus 36.5 last week, the highest level in almost 11 months, from minus 38.6 in the prior period.

Women were more positive than at any time in the past 10 months and young adults, those between the ages of 18 and 34, were the most upbeat since July.

Sentiment among the highest wage earners, those making more than $100,000 a year, was positive for a fourth straight week. At the same time, confidence among those making $50,000 to $75,000 dropped to the lowest level since June.

Political Independents

The sentiment gauge for political independents climbed to its highest level since 2007.

Geographically, Americans in the West were the least pessimistic, with the index rising to the highest level in a year.

The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, conducts telephone surveys with a random sample of 1,000 consumers 18 and older. 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 most recent reading is based on the average of responses over the previous four weeks.

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.

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