Consumer Comfort in U.S. Rises to Second-Highest Level in a YearShobhana Chandra
Consumer confidence climbed last week to the second-highest level in a year as an improving job market bolstered Americans’ views of their financial well-being.
The Bloomberg Consumer Comfort Index rose to 37.7 in the period ended Aug. 31 from 37.3 the prior week. A measure of personal finances increased to 54.2, matching the strongest reading since April 2008.
Sentiment among most income groups improved, with Americans making less than $50,000 becoming the most upbeat in a year as gasoline prices declined. More optimism on the heels of greater employment prospects and stock-market gains has the potential to stoke consumer spending, which accounts for about 70 percent of the economy.
“The pieces are falling into place for continued gradual improvement in confidence,” said Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg. “The fact that people feel they’re doing better financially is an important element. The improvement in confidence in the lower-income tier is encouraging, and makes it a more broad-based recovery.”
Two of the three components in the Bloomberg comfort index improved. In addition to the measure of finances, a gauge of Americans’ views on the current state of the economy rose to 26.7 last week from 25.9 the previous period. A gauge of the buying climate, showing whether this is a good time to purchase goods and services, cooled to 32.1 from 32.5.
Another report today showed applications for unemployment benefits were little changed last week as an improving economy prompted businesses to retain staff. Jobless claims rose by 4,000 to 302,000 in the week ended Aug. 30, a Labor Department report showed today in Washington. The total number of people on benefit rolls fell to the lowest level in more than seven years.
Stocks rose after the European Central Bank unexpectedly cut interest rates and said it will buy asset-backed securities to stimulate growth. The Standard & Poor’s 500 Index climbed 0.2 percent to 2,004.95 at 9:40 a.m. in New York.
Today’s Bloomberg consumer comfort report showed job prospects may be improving. Sentiment among unemployed Americans climbed to 33.8 last week, the fourth straight gain and the highest since early May. Confidence of part-time workers also increased.
Higher equity prices are helping boost spirits of older Americans. The index of confidence among those 65 or older reached an almost seven-year high of 41.3 from 38.6 the prior week. Homeowners were the most upbeat since the end of 2007, the report showed.
Cheaper gasoline is helping households, especially for those on the lower end of the income scale. The average price of a gallon of regular gasoline was $3.43 as of Sept. 2, down from this year’s high of $3.70 in April, according to AAA, the nation’s largest motoring group.
The comfort measure for consumers earning less than $50,000 a year increased to 29.4 last week. Confidence also rose for those making between $50,000 and $74,900 and for Americans with an annual incomes exceeding $100,000.
“We’ve seen a moderation of inflation,” Langer said. “Fuel costs are nicely subdued. That’s also helping confidence.” At the same time, “we still have a ways to go” as the job market is “still troubled” and wage gains remain weak, he added.
Consumer purchases decreased 0.1 percent in July, the first drop in six months, after a 0.4 percent June gain, Commerce Department figures showed on Aug. 29. Incomes rose at the slowest pace of the year and savings climbed to the highest level since the end of 2012.
Vehicle sales remain a bright spot. Cars and light trucks sold at a 17.5 million annualized pace in August, the strongest since January 2006, after a 16.4 million rate the prior month, according to industry figures yesterday. Chrysler Group LLC reported its best August for U.S. vehicle deliveries in 12 years, while Ford Motor Co., Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. also posted results that surpassed analysts’ projections.
“There’s no question buyers are flocking to dealerships,” said Jeff Schuster, an analyst with researcher LMC Automotive in Southfield, Michigan. “We continue to see the market in a very strong position, beating expectations. As the auto industry pulls the economy along with it, we would expect to see this kind of performance for the remainder of the year.”
Demand for big-ticket purchases such as automobiles is getting a boost from increased hiring. Employers have added an average 230,000 workers a month so far this year, the strongest pace since 1999.
A Labor Department report due tomorrow may show payrolls expanded by more 200,000 workers in August, according to the median forecast of economists surveyed by Bloomberg. The jobless rate probably fell to 6.1 percent from 6.2 percent.
The comfort gauge has averaged 35.8 so far this year compared with 44.8 in 2007, the last year of the previous expansion. The deepest recession in the post-World War II began in December 2007 and ended in June 2009.
The Bloomberg Comfort Index has been presented on a scale of zero to 100 since May, rather than the previous minus 100 to 100, with the midpoint shifting to 50 from zero. The change is also reflected in the gauge’s components. It doesn’t affect the measures’ relationship to each other or their correlation with other economic indicators. Historical data has been revised and analysis of trends, values and other variables also aren’t affected.