Bloomberg News

Consumer Comfort Index in U.S. Rises as View of Economy Improves

February 03, 2012

Feb. 2 (Bloomberg) -- Consumer confidence in the U.S. climbed for a second week as Americans became less pessimistic about the prospects for the world’s largest economy.

The Bloomberg Consumer Comfort Index rose to minus 44.8 in the period to Jan. 29 from minus 46.4 the previous week. A measure of Americans’ view of the state of economy climbed to the highest since June.

Gains in employment and post-holiday clearance sales at retailers also helped create a better buying climate for consumers, the report showed. At the same time, increasing gasoline costs threaten to hinder progress in household spending, which accounts for about 70 percent of the economy.

“Rising incomes and aggressive discounting by retailers likely created a better buying climate and bolstered consumer confidence to close out January,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “That being said, the increase in the cost of gasoline and the most tenuous of gains in the labor market does place the improvement in confidence in jeopardy.”

Another report from the Labor Department today showed applications for jobless claims decreased by 12,000 to 367,000 last week. The median estimate of economists in a Bloomberg News survey called for 371,000 first-time claims.

Stocks climbed after the figure showed the labor market is improving. The Standard & Poor’s 500 Index rose 0.2 percent to 1,326.84 at 9:35 a.m. in New York.

View of Economy

All three components of the weekly consumer comfort index improved. The measure of Americans’ views of the state of the economy rose to minus 79.1 last week from minus 81.1 the prior period. The gauge of personal finances climbed to minus 4.5 from minus 6.9. An index of the buying climate rose to minus 50.8 from minus 51.3.

The Bloomberg comfort survey has a 3-point margin of error, and the index has been stuck below minus 40 -- the level associated with recessions or their aftermath -- since the end of February 2011. The confidence gauge, which began December 1985, averaged minus 46.8 last year, compared with minus 45.7 for 2010 and minus 47.9 in 2009, the worst full-year reading on record.

Forty-one percent of survey respondents said the economy is in “poor” shape, the fewest since March.

The report is “another sign of incremental but sure gains in consumer sentiment as the economy inches forward,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.

Employment Gains

The increase in confidence partly reflects progress in the job market. Payrolls rose by 145,000 in January and the unemployment rate held at 8.5 percent, the lowest level in almost three years, according to the median forecast of economists surveyed by Bloomberg ahead of a Labor Department report tomorrow.

Confidence improved among households in income groups ranging from $25,000 to $99,900 a year, the report showed. The reading for women climbed to a six-week high.

Some companies are benefiting from the stabilization in confidence. 1-800-Flowers.com Inc., a seller of flowers and gifts on the Internet and by telephone, raised its annual sales forecast citing “positive” trends in all its businesses.

“We are heartened by the recent reports of improvement in consumer confidence,” James McCann, chief executive officer, told investors on a Jan. 26 conference call. At the same time, “we remain cognizant of the challenges in the global economic environment,” he said.

Other Measures

Not all sentiment measures are climbing in tandem. While the Thomson/Reuters University of Michigan Index rose to an almost one-year high in January, the New York-based Conference Board’s gauge dropped after reaching an eight-month peak in December.

Fuel costs have started increasing. A gallon of regular unleaded gasoline climbed to $3.45 as of Jan. 31 from a 10-month low of $3.21 in December, according to AAA, the nation’s largest automobile association.

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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