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(Updates with markets and correlation with other data starting in seventh paragraph.)
Feb. 23 (Bloomberg) -- Consumer confidence in the U.S. increased last week to the highest level since April 2008 as more Americans had a favorable view of their finances.
The Bloomberg Consumer Comfort Index rose to minus 38.4 in the period ended Feb. 19, its fifth consecutive gain, from minus 39.8 the previous week. It marked the second straight week above minus 40, which is the level associated with recessions and their aftermath. Men, homeowners and households with annual incomes of more than $50,000 were the most optimistic in more than a year.
A majority rated their personal finances as positive for the first time since July, indicating a rising stock market and job growth may encourage consumers to keep spending. At the same time, higher gasoline costs threaten to unravel the recent gains in sentiment, as occurred a year ago.
“An improving labor market and rising equity prices have bolstered sentiment of survey participants, especially those in the upper-middle and wealthy classes,” said Joe Brusuelas, a senior economist at Bloomberg LP in New York. Still, the “improvement will be put to the test in coming weeks due to the spike in gasoline prices.”
The price of a gallon of regular unleaded gasoline climbed to $3.57 as of Feb. 19 from a 10-month low of $3.21 in December, according to AAA, the nation’s largest automobile association. A year ago, gasoline costs rose through the middle of May, climbing to $3.99 a gallon, from $3.10 at the end of January. At the same time, confidence waned.
“Rising gas prices killed a short-lived advance in the CCI last winter,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “The question now is whether other factors are strong enough to counteract the usual negative impact of rising gas prices on consumer sentiment.”
Higher share prices may be lifting sentiment. The Dow Jones Industrial Average climbed above the 13,000 level this week for the first time in almost four years. It has gained about 21 percent since a recent low on Oct. 3 last year. The Dow was up 0.4 percent to 12,993.01 at 11:20 a.m. The Standard & Poor’s 500 Index was up 0.3 percent to 1361.60.
The comfort index has a “strong long-term correlation” of 0.81 with the Dow, said Langer. A correlation of 1 means components move precisely in tandem, while a reading of minus 1 means they move in the opposite direction all the time.
Jobless claims held at a four-year low last week, a report today showed. First-time filings for unemployment benefits held at 351,000 in the week ended Feb. 18, the lowest since March 2008, the Labor Department said in Washington. Unemployment in January fell to 8.3 percent, the lowest since February 2009, the Labor Department said Feb. 3.
The comfort index has a minus 0.63 correlation with jobless claims and a minus 0.79 correlation with unemployment, according to Langer. The index has a 0.67 correlation with housing starts, which were up in January from the prior month as well as from a year earlier.
Two components of the weekly consumer comfort index improved, while the third declined. An index of the buying climate increased to minus 42.7, the highest since January 2011, from minus 47.4. The gauge of personal finances was little changed at 1, the highest since July, after a reading of 0.2, with 51 percent rating their finances as positive. The measure of Americans’ views on the state of the economy fell to minus 73.3 from minus 72.1 the prior week.
The comfort index reached its highest level in almost a year among Republicans, at minus 34.7. Among political independents, considered a key group in presidential elections, the gauge is 10.7 points higher than when President Barack Obama took office in January 2009.
The index rose to almost four-year highs among blacks and 55- to 64-year olds, the bulk of the baby boom population.
The weekly Bloomberg comfort index, which began December 1985, has averaged minus 43.3 this year following last year’s minus 46.8 average. That compared with minus 45.7 for 2010 and minus 47.9 in 2009, the worst full-year reading on record.
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old and older. 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, Gail DeGeorge
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