Bloomberg News

Consumer Comfort in U.S. Stabilized Last Week as Firings Slowed

January 26, 2012

Jan. 26 (Bloomberg) -- Consumer confidence in the U.S. steadied last week as fewer firings helped ease concern about higher gasoline prices.

The Bloomberg Consumer Comfort Index was minus 46.4 in the period ended Jan. 22 after minus 47.4 the prior week. Confidence among independent voters, which may be a swing group in the 2012 election, rose to its best level since April.

A drop in dismissals may be the first step to a further pickup in hiring that will help underpin consumer spending, which accounts for about 70 percent of the economy. Climbing fuel costs, which also helped cut short a rebound in confidence about a year ago, are again threatening to undermine households as 2012 gets under way.

“Consumer confidence looks to have stabilized, albeit at low levels,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Some of the better data flow in manufacturing and labor market is likely the source of the modest improvement.”

Stocks advanced after a gain in durable goods orders exceeded forecasts and earnings at companies including Caterpillar Inc. and Netflix Inc. exceeded projections. The Standard & Poor’s 500 Index rose 0.3 percent to 1,329.48 at 9:36 a.m. in New York.

Orders for goods meant to last at least three years climbed 3 percent in December after a revised 4.3 percent gain the prior month that was more than previously estimated, Commerce Department figures in Washington showed. Demand picked up for machinery, metals, aircraft and motor vehicles.

Jobless Claims

A separate report showed claims for jobless benefits rose last week, displaying the typical volatility around holidays. Applications for unemployment insurance payments climbed by 21,000 to 377,000 in the week ended Jan. 21, up from an almost four-year low in the prior period.

All three components of the weekly consumer comfort index improved, today’s report showed. The measure of Americans’ views of the current state of the economy rose to minus 81.1 from minus 82.5 in the prior period, and the buying climate index increased to minus 51.3 from minus 52.2. The gauge of personal finances climbed to minus 6.9 from minus 7.5.

The changes masked even more marked shifts among those with pessimistic views. The share of respondents saying the economy was in poor shape, the weakest category, dropped to the lowest level since March. Those saying it was a poor time to buy needed goods and services fell to an almost one year low.

Registered Democrats were among the groups showing the biggest decrease in fostering the most negative views.

Improving Economy

Data in recent weeks showed the economy strengthened at the end of last year, easing concern that the European debt crisis will cause the U.S. to falter.

The unemployment rate unexpectedly fell in December to 8.5 percent, the lowest since February 2009, and payrolls rose by 200,000, twice as much as in November, the Labor Department said Jan. 6. A factory survey showed the fastest growth in December in six months, while sales of existing homes were the highest since January 2011.

Confidence among independents rose to minus 40.4 from minus 40.6, and that among registered Democrats climbed to minus 51.2 from the prior week’s minus 52.1. Sentiment among Republicans rose to minus 47.3 from minus 50.3.

The average price of regular unleaded gasoline at the pump has been hovering around $3.38 a gallon for the past two weeks, up from a 10-month low of $3.20 reached on Dec. 20, according to AAA, the biggest U.S. auto group.

Gasoline Prices

“Competing economic and political forces, depending how they play out, may threaten the current tentative recovery in consumer sentiment,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “The price of gasoline is one example; it’s been steadily climbing this month.”

Other confidence measures have improved. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed in January to the highest level in eight months, the group said Jan. 13. The Conference Board’s index of confidence in December also rose to the highest since April.

“We’re pleased that consumer confidence is up,” John Olin, chief financial officer at Harley-Davidson Inc. told a teleconference this week after the Milwaukee-based motorcycle maker reported a fourth quarter profit on higher sales. Nonetheless, he said, the company remained “cautious as we look forward, given the tentative nature of the overall economy and consumer confidence.”

Fed Policy

Federal Reserve policy makers yesterday in their first meeting of the year said their benchmark interest rate will stay low until at least late 2014 and projected that unemployment will remain above 8 percent.

The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers at least 18 years old. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses for each measure is subtracted from the share of positive views. The results are then summed and divided by three. The most recent reading is based on the average of responses over the previous four weeks.

The comfort index, which began in December 1985, averaged minus 46.8 last 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.

The Bloomberg 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.

--With assistance from Kristy Scheuble in Washington. Editors: Carlos Torres, Vince Golle

Company News: HOG US <Equity> CN

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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


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