Consumer Comfort Index in US Climbs for Fourth Straight Week

Location: New York
Author: Meghan Womack
Date: Monday, April 25, 2011

“Gloom has spread this year in step with the price of gasoline”

The Bloomberg Consumer Comfort Index climbed to minus 42.6 in the period to April 17, the best reading since the end of February, from minus 43 the prior week. A measure of expectations fell to the lowest level since September, a sign rising fuel costs are causing families to think the economy will take a turn for the worse in coming months.

While employment has picked up over the past two months, households are struggling to maintain spending as the price of gasoline climbs to the highest level in almost three years. The world’s largest economy probably grew at a slower pace in the first quarter as consumer spending cooled, according to economists surveyed by Bloomberg News.

For full CCI results, see: http://www.bloomberg.com/cci.

“Consumer sentiment is resting on the knife’s edge,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Sentiment is likely to continue to move based on labor market conditions, fuel costs and equity prices.”

The latest results for the comfort survey reflected improvements in two of the three subcomponents. The index of Americans’ views of the economy rose to minus 78.2 last week, the best reading since the first week of March from minus 80.4 the prior week.

The measure of personal finances increased to minus 0.3, the highest since the end of February, from minus 0.5. The index of the buying climate declined to minus 49.2 from minus 48.

Bloomberg’s gauge of economic expectations, released once a month, declined for a third straight time with pessimistic views jumping to the highest level since September 2009.

The measure fell to minus 16 from minus 8, and 40 percent of respondents said the economy is getting worse. In January that component fell to the lowest level since 2002. The share of those in April saying the economy is getting better fell to 24 percent from 30 percent the prior month.

Figures from the Labor Department last week help explain why Americans’ expectations of the economy soured and why they may be less inclined to make purchases. The consumer-price index showed the cost of living in the U.S. rose in March for a ninth consecutive month, led by increases in food and fuel costs.

The Bloomberg Consumer Comfort Index, with data dating back to December 1985, fell to a record low of minus 54 in November 2008, while the peak of 38 was reached in January 2000. Readings averaged minus 45.7 last year.

A Labor Department report today showed that new applications for unemployment benefits fell less than forecast last week, indicating the improvement in labor-market has stalled.

Jobless claims decreased by 13,000 to 403,000 in the week ended April 16. Economists projected a decline to 390,000, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls and those receiving extended payments declined, according to the government data.

Stocks climbed on better-than-estimated earnings at Apple Inc., General Electric Co. and Morgan Stanley. The Standard & Poor’s 500 Index rose 0.4 percent to 1,336.22 at 9:36 a.m. in New York.

The average price of regular gasoline at the pump rose 6 cents to $3.83 a gallon in the week ended April 17, according to AAA, the nation’s biggest motoring organization. It climbed to $3.84 on April 19, the highest since September 2008.

“Gloom has spread this year in step with the price of gasoline,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “In addition to increased pain at the pump, politics play a role in heightened economic worry.”

A partisan debate in Washington over how to reduce fiscal budget deficits and trim the nation’s debt could send a “near-term shock” through a U.S. economy still struggling to recover, said Deere & Co. Chief Executive Officer Samuel Allen.

“I have a lot of concerns for the economy,” Allen, who leads the world’s largest maker of farm equipment, said yesterday in an interview in Bloomberg’s Chicago bureau. “I don’t think we are out of this.”

The economy created 216,000 jobs last month, the most since May, and the jobless rate fell for a fourth straight month to a two-year low of 8.8 percent, data from the Labor Department showed.

Reflecting the labor market outlook, the comfort gauges improved last week for Americans with full-time jobs, as well as for those who were unemployed.

Consumers became less pessimistic in most income ranges, led by those making $50,000 to $74,900 a year. The comfort index for this group improved to minus 36.5 from minus 40.3 the prior week.

The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over. 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, Pennsylvania.

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