Consumer Comfort in U.S. Little Changed Amid Government ShutdownBen Schenkel
Consumer confidence was little changed last week even as the government’s partial shutdown and the prospect of a default made Americans less optimistic about the economy.
The Bloomberg Consumer Comfort Index retreated to minus 29.7 in the week ended Oct. 6 from minus 29.4. The decrease was within the margin of error of 3 percentage points. A gauge of opinions on the economy fell to the lowest level in more than six months, while measures of personal finances and the buying climate improved.
The divergence indicates views on the economy are more easily swayed by the gridlock in Washington as the failure of lawmakers to reach a compromise on the budget dims the outlook. Matters closer to home, on the other hand, including a resilient job market and falling gasoline prices, are helping underpin sentiment, particularly for high-income consumers.
“Upper-end households, who are thriving in the current environment, remain confident,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. At the same time, if the conflict continues, he said it “will likely put a dent in consumer sentiment and business confidence in coming weeks.”
The comfort index has vacillated within a 1.6-point range over the past month, indicating stability in the face of the bitter political debate. The measure reached its highest level since January 2008 in early August.
A separate report today showed more Americans than forecast filed applications for unemployment benefits last week as California worked through a backlog caused by a switch in computer systems and the federal shutdown forced some government contractors to pare staff.
Jobless claims surged by 66,000 in the week ended Oct. 5, the most since the aftermath of superstorm Sandy in November, to 374,000, the Labor Department said in Washington. The median forecast of 47 economists surveyed by Bloomberg called for an increase to 311,000.
Stocks climbed amid signs the nation’s lawmakers could reach an agreement to increase the debt ceiling. The Standard & Poor’s 500 Index rose 1 percent to 1,673.36 at 9:33 a.m. in New York.
The gauge showing Americans’ current views on the economy dropped to minus 60.2 last week, the weakest since late March, from minus 57.8. The buying-climate measure rose to minus 33.5 from minus 35, and the reading on personal finances climbed to 4.7, a two-month high, from 4.5.
Lower fuel prices are giving households more latitude to spend. The average cost of a gallon of regular-grade gasoline fell to $3.35 on Oct. 6, the lowest since January, according to data from AAA, the country’s biggest motoring group.
Even as households feel more secure in their personal finances, the federal government’s closure, now in its 10th day, risks damaging confidence and detracting from growth.
The comfort data contrast with other sentiment measures that have slumped since the shutdown took effect. A Gallup index of U.S. economic confidence last week had the largest decline since the 2008 collapse of Lehman Brothers Holdings Inc. One-third of respondents in another Gallup survey pointed to “dysfunctional government” as the top problem facing the country, the largest share in 74 years of polling.
The Thomson Reuters/University of Michigan preliminary index of sentiment is scheduled for release tomorrow. The median estimate in a Bloomberg survey of 66 economists calls for a decrease to 75.9 from a final reading of 77.5 in September.
The Bloomberg comfort index is a four-week rolling average, meaning it’s less volatile than shorter-term measures. Survey data from previous weeks enter into the final reading, which blunts any negative effect the shutdown has had on confidence.
“If we get another bad week in the week ahead, we can expect to see more of a decline in next week’s index,” said Gary Langer, president of the New York-based Langer Research Associates, which produces the Bloomberg index.
Today’s figures showed a rise in confidence among those with incomes greater than $100,000 a year. The reading for this highest-earning group increased to 19, the strongest since early August, from 16.1 the week prior.
For those with incomes less than $50,000, their confidence fell last week to minus 51.2. Discount retailers including Family Dollar Stores Inc. are facing a possible contraction in shopper traffic as the holiday-buying season approaches.
“While many higher-income consumers are feeling better and more confident about the future, our core customer continues to struggle,” Michael Bloom, president and chief operating officer of Family Dollar, said yesterday on an earnings call. “They’re dealing with tepid job growth, higher taxes and reductions in government assistance programs.”
Confidence among people between the ages of 55 and 64 rose last week to its best level since December 2007, today’s report showed. Sentiment fell among those between the ages of 18 and 34 to a five-month low.
Optimism increased for both Republicans and Democrats, and sank among political independents.
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.