Bloomberg News

Consumer Comfort in U.S. Declines for First Time in Five Weeks

June 23, 2011

June 23 (Bloomberg) -- Consumer confidence fell for the first time in five weeks as Americans grew more concerned about the economy.

The Bloomberg Consumer Comfort Index dropped to minus 44.9 in the period to June 19, from the prior week’s minus 44. The decline, within the survey’s margin of error of 3 percentage points, left the gauge close to its average for the year.

Unemployment at 9.1 percent, higher food costs and lower home values are weighing on sentiment and adding to the risk of a slowdown in consumer spending, which accounts for 70 percent of the economy. The Federal Reserve yesterday said it will maintain record monetary stimulus to help bolster the recovery.

“Disillusion has settled in among the public over the direction of the country that will likely not fade anytime soon,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The first half of 2011 has been nothing short of an economic disappointment.”

More Americans than forecast filed claims for unemployment insurance payments last week, showing companies are less confident about the expansion than they were earlier this year, a report from the Labor Department also showed today.

Applications increased by 9,000 in the week ended June 18 to 429,000. The number of claims dropped as low as 375,000 in February, the fewest since July 2008.

Stocks fell for a second day on concern about the labor market and the effects of the European debt crisis on banks. The Standard & Poor’s 500 Index decreased 1.4 percent to 1,269.13 at 9:33 a.m. in New York.

Economy Views

The Bloomberg comfort report showed an index of consumers’ views of the economy fell to minus 80.1 last week, the worst reading since April, from minus 77 the previous week.

The data buttress the results of a separate Bloomberg National Poll conducted June 17-20. It found that two years after the start of the recovery, 25 percent of those surveyed worried the economy was getting worse, while 23 percent said they were hopeful the recovery was improving. By a 44 percent to 34 percent margin, Americans said they believed they were worse off than when President Barack Obama took office in early 2009.

The weekly Bloomberg comfort gauge of personal finances deteriorated to minus 7.6, following four consecutive weeks of improvement. The buying climate measure climbed to minus 47, the best showing since January.

Today’s report also showed the sentiment index among people with annual household incomes exceeding $100,000 fell to minus 8.9 last week from minus 3.6. The gauge has been negative for six straight weeks. An S&P 500 that’s dropped 6.6 percent from May 2 to June 17 may be unnerving higher-income Americans.

Average This Year

The overall Bloomberg consumer comfort index has averaged minus 44.7 so far this year, compared with minus 45.7 in 2010 and minus 47.9 in 2009, the report showed.

“Three years after consumer sentiment tipped into the recession zone, recovery remains an aspiration, not a reality,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.

The comfort index for part-time workers improved to a four- month high of minus 43.8 last week. Sentiment fell among jobless Americans and among those with full-time jobs.

La-Z-Boy Inc., a maker of living-room recliners, is among companies seeing shoppers respond to weaker economic data, especially in industries that offer discretionary products like furniture.

“Right now, unfortunately, there is probably more bad news than good news,” Kurt Darrow, chief executive officer of Monroe, Michigan-based La-Z-Boy, said on a conference call with analysts yesterday. “There is this flailing about the economy.”

Fuel Costs

At the same time, cheaper fuel has brought some relief. The average cost of a gallon of regular gasoline fell to $3.63 on June 22 from a May 4 price of $3.99 that was the highest since July 2008, according to AAA, the nation’s largest auto club.

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 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.

--Editors: Vince Golle, Carlos Torres

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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