Consumer comfort index in U.S. climbs to highest level in a year

Posted 2/9/12

WASHINGTON - Consumer confidence in the U.S. climbed last week to a one-year high, spurred by improving employment opportunities and a rally in the stock market.

The Bloomberg Consumer Comfort Index rose to minus 41.7 in the period to Feb. 5 from minus 44.8 the previous week. Confidence among political independents, considered a key group in presidential elections, increased to a four-year high.

Americans’ views of the economy were the least pessimistic in eight months after employers beefed up payrolls in January and joblessness fell to the lowest level since February 2009. Consumers may be looking beyond the recent rise in gasoline prices as the increase in equity values boosts household wealth and promotes spending.

“Encouraging labor-market gains over the past two months are the likely catalyst for the sharp improvement,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Declining natural gas and home heating oil prices are likely offsetting rising gasoline prices, which has probably bolstered consumer balance sheets along with consumer sentiment.”

Fewer Americans than forecast filed claims for unemployment insurance payments last week, indicating the labor market recovery is gaining traction, figures from the Labor Department showed today. Applications for jobless benefits decreased by 15,000 in the week ended Feb. 4 to 358,000. The median forecast of 48 economists surveyed by Bloomberg News projected 370,000.

There were 366,250 claims filed on average over the past four weeks, the fewest since April 2008.

Stocks advanced as Greek political leaders struck a deal on a package of austerity measures needed to secure international rescue funds. The Standard & Poor’s 500 Index climbed 0.1 percent to 1,350.84 at 9:40 a.m. in New York.

Components Climb

All three components of the weekly consumer comfort index improved from the prior week. The measure of Americans’ views of the state of the economy rose to minus 76.6 last week from minus 79.1. The gauge of personal finances climbed to zero, the highest since July, from minus 4.5. An index of the buying climate increased to minus 48.4 from minus 50.8.

The Bloomberg comfort survey has a 3-point margin of error, and the index has been stuck below minus 40 -- the level associated with recessions or their aftermath -- since the end of February 2011. The confidence gauge, which began December 1985, averaged minus 46.8 last year, compared with minus 45.7 for 2010 and minus 47.9 in 2009, the worst full-year reading on record.

Forty-one percent of survey respondents said the economy is in “poor” shape, the fewest since March. Half of the respondents rated their own finances as “positive,” the most since September.

‘Breakout Range’

The comfort gauge “moved to within breakout range of its recession zone,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “Many groups reached recent highs. Notable among them: political independents, the key swing voters in national elections.”

Confidence among households not aligned with any political party rose to minus 33.4, the highest level since January 2008, and Republican sentiment climbed to an almost two-month high of minus 45. Confidence was little changed among Democrats.

The increase in sentiment partly reflects progress on the jobs front. Payrolls rose by 243,000 workers last month, the biggest gain since April, and the unemployment rate fell to 8.3 percent, the Labor Department said on Feb. 3.

Sentiment among respondents ages 55 to 64 climbed to an almost four-year high, today’s report showed, while confidence among homeowners rose to the highest level since December 2010.

Stock Market

Higher stock prices and signs real estate is on the mend may be shoring up sentiment among both groups. The Dow Jones Industrial Average this week climbed to the highest level since May 2008, while sales of previously owned homes rose in December to an 11-month high.

Sysco Corp., the biggest North American distributor of food to restaurants, is among companies that may benefit from more upbeat attitudes.

“To a large extent, our performance in the second half of the year will be heavily influenced by how much the recent uptick in consumer confidence translates into increased consumer spending on meals away from home,” Chief Executive Officer Bill DeLaney said on a Feb. 6 conference call with analysts.

Not all sentiment measures are climbing in tandem. While the Thomson/Reuters University of Michigan Index rose to an almost one-year high in January, the New York-based Conference Board’s gauge dropped after reaching an eight-month peak in December.

Gasoline Prices

Increasing fuel costs pose a threat to the rebound in sentiment. A gallon of regular unleaded gasoline climbed to $3.49 as of Feb. 8 from a 10-month low of $3.21 in December, according to AAA, the nation’s largest automobile association.

The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 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.

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

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