Bloomberg News

Consumer Comfort Index in U.S. Caps Worst Quarter Since 2009

October 06, 2011

Oct. 6 (Bloomberg) -- Consumer confidence last week capped the worst quarterly performance in more than two years, when the U.S. economy was still in a recession.

The Bloomberg Consumer Comfort Index rose to minus 50.2 in the week ended Oct. 2, from the prior period’s minus 53 that was the second-lowest level on record. The gauge averaged minus 48.4 from July through September, the third-worst quarterly reading of all time and the weakest since minus 49.9 in the first three months of 2009.

Ninety-two percent of those surveyed had a negative opinion of the economy, underscoring the concerns of Federal Reserve Chairman Ben S. Bernanke, who this week said the central bank can take further steps to sustain a recovery that’s “close to faltering.” An ailing housing market, stagnant payrolls and stock-price declines have reduced Americans’ ability to spend.

“A weak labor market and sagging incomes continue to place stress on households,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Higher headline prices and stagnant incomes will likely provide further downward pressure on consumer sentiment.”

Fewer workers than forecast filed claims for unemployment insurance payments last week, signaling companies may be starting to slow the pace of firings, another report today showed. Applications for jobless benefits increased by 6,000 in the week ended Oct. 1 to 401,000, Labor Department data showed.

Economists projected 410,000 claims, according to the median estimate in a Bloomberg News survey. The monthly average dropped to the lowest level since the end of August.

Comfort Breakdown

Among the comfort index’s three components, the measure of personal finances rose to minus 9.1 last week from minus 11.6 the prior period. The buying climate gauge climbed to minus 57.3 from minus 61, which was the lowest level since the aftermath of the Lehman Brothers Holdings Inc. bankruptcy in October 2008. The index of American’s views on the economy rose to minus 84.3 from minus 86.4.

Confidence remains depressed for groups especially hit hard by the recession that ended June 2009. Homeowner sentiment was minus 48.7, less than a point from a record low. The gauge for those with only a high school diploma was at minus 63, two points from the lowest level in data going back to 1990.

The Bloomberg consumer comfort index, which began in December 1985, has been stuck below minus 40 -- the level associated with recessions or their aftermath -- since the end of February. It has averaged minus 45.9 this year, compared with minus 45.7 for 2010 and minus 47.9 in 2009.

Recessionary Level

The readings echo the time “when the Great Recession still was officially on,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “If it’s over, the public missed the memo.”

Gains in payrolls in September were probably too small to reduce joblessness, a Labor Department report may show tomorrow. Employment climbed by 57,000 workers after no change in August, according to the median forecast in a Bloomberg News survey of economists. The unemployment rate was 9.1 percent for a third month, they projected.

Stock market losses are eroding wealth. The Standard & Poor’s 500 Index closed below 1,100 on Oct. 3 for the first time in more than a year, putting the gauge within 1 percent of a bear market, a threshold defined by declines of 20 percent or more from the peak.

The S&P 500 swung between gains and losses after European Central Bank President Jean-Claude Trichet said the euro-area economy faces “intensified downside risks.” The gauge fell 0.1 percent to 1,142.8 at 9:40 a.m. in New York.

Cutting Back

Costco Wholesale Corp., the largest U.S. warehouse-club chain, said the strain on household budgets is helping drive more customers to its stores to save on items like groceries.

“We’re concerned as every one of you are out there every day with the gyrations in the market and the mortgage statistics and the unemployment statistics,” Chief Financial Officer Richard Galanti said on a conference call with analysts yesterday. “If you asked us do we feel good about what’s going on out there, no, in terms of the economy.”

The Fed last month decided to replace $400 billion of Treasuries in its portfolio with longer-term securities to further help reduce borrowing costs and trim unemployment.

Those steps are “particularly important now that the economy is, the recovery is, close to faltering,” Bernanke said in testimony to Congress on Oct. 4. “The recovery from the crisis has been much less robust than we had hoped,” he said.

Survey Details

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.

--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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