Bloomberg News

Consumers’ Outlook on U.S. Economy Improves to Four-Month High

November 18, 2011

Nov. 17 (Bloomberg) -- Consumers’ views on the U.S. outlook improved in November, showing concern is dissipating that the world’s largest economy will tip back into a recession.

The Bloomberg Consumer Comfort Index’s monthly expectations gauge climbed to minus 32, the best reading since July, from minus 45 the previous month. The weekly measure of current conditions was minus 50 for the period ended Nov. 13, climbing for a second week after sinking to an almost three-year low.

Household spending, which accounts for about 70 percent of the economy, has picked up in the second half of the year even as stocks and confidence sank. The recovery may mean Americans are going shopping to relieve the pessimism brought on by a jobless rate that has been around 9 percent or more since mid 2009, according to economists like Joseph Brusuelas.

“After a long period of modest consumption, some pent-up demand is being released,” said Brusuelas, a senior economist at Bloomberg L.P. in New York. At the same time, “it is likely too early to conclude that consumer sentiment has bottomed out,” he said.

The improvement in the economic outlook this month was led by declining pessimism among homeowners, older adults and those living in the South, the report showed. Nonetheless, the index is at the lowest level of any November since 2008.

Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week, an indication the job market may be gaining traction, a Labor Department report showed today.

Applications for jobless benefits decreased 5,000 in the week ended Nov. 12 to 388,000, the lowest level since April. Economists forecast 395,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls fell to a three-year low.

Housing Starts

Builders broke ground on more homes than forecast in October and construction permits climbed to the highest level since March 2010, Commerce Department figures today showed.

Starts decreased 0.3 percent to a 628,000 annual rate from September’s 630,000 pace that was slower than previously reported. The median estimate of economists surveyed by Bloomberg called for a drop to 610,000. Building permits, a proxy for future construction, increased 10.9 percent.

Stocks fell for a second day on concern about Europe’s debt crisis. The Standard & Poor’s 500 Index dropped 0.3 percent to 1,233.14 at 9:35 a.m. in New York.

The weekly comfort index climbed from 51.6 the prior period. It dropped to minus 53.2 two weeks ago, second only to minus 54 outcomes in late November 2008 and January 2009 as the worst in 26 years of record keeping.

Three Components

All three of its components improved last week. The measure of Americans’ views of the current state of the economy rose to minus 88 from minus 88.9 in the prior period. The gauge of personal finances climbed to minus 14.6 from minus 17.4. The buying climate index moved up to minus 47.4, the highest level since July, from minus 48.6.

Political party members diverged in their assessments, with Democrats less downbeat than Republicans for a third straight week. Among Democrats, the gauge climbed to minus 41, while confidence among Republicans rose to minus 51.2.

Confidence among men exceeded that of women by the most since July, today’s report showed. The gauge for men climbed to minus 43.3, compared with minus 56.3 for women.

Incomes are a driver of sentiment as the gauge for those making less than $15,000 a year fell last week to minus 76.6, compared with minus 9.6 for households making more than $100,000 annually. Such widespread pessimism means retailers will have to get creative to boost sales.

Bargain-Hunting

“The results suggest that whatever market segment retailers focus on, holiday shoppers are likely to be looking for bargains,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.

Retail sales rose more than projected in October. The 0.5 percent gain followed a 1.1 percent increase for September, Commerce Department figures showed this week. The median forecast of economists surveyed by Bloomberg News called for a rise of 0.3 percent.

The unemployment rate unexpectedly fell in October, while employers added the fewest workers in four months, supporting Federal Reserve Chairman Ben S. Bernanke’s projection of a “frustratingly slow” recovery. Joblessness slid to 9 percent from 9.1 percent. Payrolls rose by a less-than-forecast 80,000, Labor Department data showed Nov. 4.

The pace of job and economic growth is weighing on shoppers at merchants like Wal-Mart Stores Inc., the world’s largest retailer.

Higher Unemployment

“Our core customer was still impacted by high unemployment and continued uncertainty over the economy, leading to declining consumer confidence,” Bill Simon, the top U.S. executive for Wal-Mart, said in a Nov. 15 conference call with analysts.

The Bloomberg comfort index, which began in December 1985, has averaged minus 46.6 this year compared with minus 45.7 for all of 2010 and minus 47.9 in 2009, the year the recession ended, the report showed.

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: Carlos Torres, Vince Golle

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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


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