Consumer Comfort in U.S. Held Last Week Close to Five-Year High

Consumer sentiment last week held close to a five-year high as Americans gained confidence their financial situation was mending, a sign the biggest part of the economy will keep expanding.

The Bloomberg Consumer Comfort Index fell to minus 29.9 in the week ended April 21 from the prior period’s minus 29.2 that was the highest since January 2008. The decline was within the margin of error of 3 percentage points. Households were the most optimistic about their finances in 10 months.

Confidence held up even in the face of the biggest weekly drop in stock prices in five months, indicating that rising home values and easing fuel costs are helping to shore up balance sheets. The report may mean any slowdown in consumer spending will prove temporary just as other parts of the economy, including manufacturing, are cooling.

“Americans are feeling more secure about their own financial situation,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Household wealth is recovering. The decline in gasoline prices is providing some relief to households across the income spectrum.”

Of the three components of the comfort index, the personal finances gauge climbed to 3.5 last week, the highest since June, from 1.6, the survey showed.

The Standard & Poor’s 500 Index has risen 10.7 percent this year through yesterday, helping repair the damage done by the 2007-2009 recession. The gauge has surged 133 percent from a 12-year low in 2009.

Fewer Claims

Fewer Americans than forecast filed claims for unemployment insurance payments last week, pointing to an improving labor market, other figures showed today. Applications for jobless benefits decreased by 16,000 to 339,000 in the week ended April 20, the lowest since March 9, according to the Labor Department.

Economists projected 350,000 claims, according to the median estimate in a Bloomberg survey. A Labor Department spokesman said the claims data typically bounce around this time of year.

Stocks rose today as companies from Cliffs Natural Resources Inc. to 3M Co. reported earnings that topped estimates and jobless claims fell. The Standard & Poor’s 500 Index climbed 0.3 percent to 1,583.97 at 9:40 a.m. in New York.

The comfort survey’s measure assessing Americans’ views on the current state of the economy dropped to minus 58.3 from a five-year high of minus 54.7 the prior week.

Buying Climate

At the same time, the index of whether consumers consider it a good time to buy was minus 34.8, little changed from a four-month high of minus 34.6 in the prior week.

Households continue to purchase automobiles. Cars and light trucks sold at an average 15.3 million annualized rate in the first quarter, the most since the same period in 2008, according to data from Ward’s Automotive Group.

One reason may be that home equity is being restored. House prices rose 7.1 percent in the year ended February, the biggest 12-month gain since May 2006, data from the Federal Housing Finance Agency showed this week.

Housing-related businesses are among those counting on improving home sales and consumer sentiment. Benton Harbor, Michigan-based Whirlpool Corp., the world’s largest appliance maker, expects the industry will benefit from sustained demand.

“As we continue the year, we remain optimistic about the continued strength in U.S. housing and the consumers will gain confidence as federal government policies become clearer,” Marc Bitzer, president of Whirlpool North America, said on an earnings conference call on April 24.

Cheaper Gasoline

Cheaper fuel costs may also be helping. The price of regular gasoline at the pump averaged $3.51 on April 18, the lowest in more than two months. As recently as late February, the average was $3.79.

The Bloomberg consumer comfort survey also showed Americans making more than $50,000 were the least pessimistic since November 2007. This measure climbed to minus 0.3 last week, from minus 3.3.

The mood of college graduates was the best in the past year, with their comfort reading rising to minus 18.9 last week from minus 20.8.

Progress in the labor market, albeit slower in March than at the start of the year, may be helping underpin confidence. While employers last month added the fewest workers since June, the jobless rate fell to a four-year low of 7.6 percent.

Confidence among consumers in the South was at the highest in the past year, and sentiment among independent voters last week was just short of a five-year high reached in late February, the comfort survey also showed.

Survey Methodology

The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, conducts telephone surveys with a random sample of 1,000 consumers ages 18 and older. Each week, 250 respondents are asked for their views on the U.S. 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.

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