Dec. 15 (Bloomberg) -- Consumer confidence in the U.S. rose last week to the highest level in two months, a sign that job gains may be lifting sentiment during the holiday shopping season.
The Bloomberg Consumer Comfort Index was at minus 49.9 in the period ended Dec. 11, after a reading of minus 50.3 the prior week. Confidence among Americans with full-time jobs climbed to the highest level in almost five months.
A decline in unemployment last month complemented by increasing payrolls may help reverse the recent decline in household confidence. At the same time, the European debt crisis and gridlock among lawmakers in Washington could prevent further gains in sentiment.
“The modest increase in private-sector hiring has at least tentatively prevented another leg down in confidence,” said Joseph Brusuelas, a senior economist at Bloomberg L.P. in New York. “Perhaps the traditional holiday season has injected a bit of hope that the worst has passed, at least for those fortunate to have a job and disposable income to enjoy the holidays.”
First-time claims for unemployment benefits dropped last week to a three-year low, showing the labor market is improving. The number of applications for jobless insurance dropped by 19,000 to 366,000 in the week ended Dec. 10, the fewest since May 2008, the Labor Department said today.
Stocks extended gains after the report, with the Standard & Poor’s 500 Index rising 1 percent to 1,223.82 at 9:40 a.m. in New York. Treasury securities fell, sending the yield on the 10- year note up to 1.93 percent from 1.90 percent late yesterday.
A report from the Federal Reserve showed industrial production cooled last month. Output at the nation’s factories, mines and utilities declined 0.2 percent in November, the first decrease in seven months.
The figures are a reminder that a slowing economy in Europe may limit shipments from American factories and restrain the industry that’s been a source of strength for the recovery.
The Federal Reserve Bank of New York said that factories in the region grew in December by the most in seven months, spurred by employment and orders.
Two of the three components of the weekly comfort index improved. The measure of Americans’ views of the current state of the economy rose to minus 87.9 last week from minus 89.7 in the prior period, and the buying climate index increased to minus 51.8 from minus 52.6. The gauge of personal finances declined to minus 10 from minus 8.5.
The Bloomberg comfort index, which began in December 1985, has averaged minus 46.9 this year compared with minus 45.7 for all of 2010 and minus 47.9 in 2009, the worst full-year reading on record, the report showed.
Confidence among consumers with a full-time job rose to minus 32, the highest level since July, from minus 37.6 the prior week. Sentiment declined for Americans who are unemployed and for those with part-time jobs.
Political affiliations led to differing levels of confidence among Americans, today’s report showed. Republicans’ sentiment improved to minus 45.2, from minus 47.8, while that of Democrats declined to minus 51.3 from minus 46.8 the previous week.
Other sentiment indicators have rebounded. The Conference Board’s index of confidence in November had the biggest monthly gain since April 2003. The Thomson Reuters/University of Michigan final index of sentiment rose last month to the highest level since June.
‘Feeling Pretty Good’
“Given recent sales trends and consumer confidence numbers, we’re feeling pretty good about where the industry is going,” Don Johnson, General Motors Co. vice president of U.S. sales, said Dec. 1 on a conference call with analysts.
Better job prospects may have supported some of the improved views in today’s report. Employment climbed by 120,000 workers in November, and the jobless rate dropped to 8.6 percent, the lowest since March 2009, from 9 percent, Labor Department figures showed Dec. 2.
“While far from wholesale relief, these trends hold out at least the possibility of a break from the unrelenting consumer discontent that’s run steadily for the past three years,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.
“The economy has been expanding moderately, notwithstanding some apparent slowing in global growth,” the Federal Open Market Committee said in a statement at the conclusion of its meeting this week in Washington. “While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated.”
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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