Household confidence improved last week to match the highest level in four years as more Americans said their finances were in better shape.
The Bloomberg Consumer Comfort Index was minus 31.4 in the period ended April 15, compared with minus 32.8 over the previous seven days. The reading equaled that from two weeks earlier as the best since March 2008. Nonetheless, the monthly expectations measure fell from a one-year high, showing concern remains that too many Americans are still unemployed.
“The uneven nature of the recovery will likely continue to restrain the type of improvement in consumer sentiment that one would traditionally observe at this point in the expansionary cycle,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
A strengthening job market and leveling off in gasoline prices may keep underpinning confidence, raising the odds that consumer spending will continue to grow and benefit companies like Bed, Bath & Beyond Inc. (BBBY:US) and Toyota Corp. At the same time, 5 million more Americans are unemployed now than when the recession began in December 2007, showing why cheerier outlooks will be difficult to sustain.
In a sign labor-market gains may be cooling, more Americans than forecast filed claims for unemployment benefits last week.
Jobless applications fell by 2,000 to 386,000 in the week ended April 14 from a revised 388,000 the prior period that was higher than initially estimated, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for a drop to 370,000.
The Standard & Poor’s 500 Index fell 0.1 percent to 1,383.54 at 9:40 a.m. in New York.
The weekly measure of Americans’ views on their personal finances climbed to 6.8, the highest reading since April 2008, from 4.8 the prior week. The gauge on the current state of the economy rose to minus 64.3 from minus 66.
For the sixth consecutive week, 30 percent or more of those polled rated the buying climate positively, the best showing since 2008. Nonetheless, the index of whether consumers consider it a good time to purchase needed goods or services eased to minus 36.8 from minus 37.3.
The monthly expectations gauge dropped to minus 3 from 1 in March, the highest level since January 2011.
The setback “underscores the still-tenuous nature of consumer’s climb out of the deepest downturn in more than 70 years,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement.
Men, college graduates, homeowners and households earning more than $50,000 a year were among the groups for which confidence climbed last week to the highest level in four years. For those making from $50,000 to $74,999, the index jumped to the highest level since January 2008.
There was also a political element as sentiment for registered Democrats rose last week to the best level since August 2007, and that for independents climbed to the highest since December 2007. The index for Republicans last week was 38 points lower than its average dating back to 1990.
The decline in the monthly expectations index showed a similar divide. The number of Republicans that said the economy was improving dropped by 13 points, and that for independents decreased by 10 points. Just over half, 51 percent, of Democrats responded positively, up 8 percentage points.
President Barack Obama and probable Republican challenger Mitt Romney may focus on luring independents in this year’s election.
Today’s report also showed a regional bias as the advance in confidence last week was paced by those living in the South and Midwest.
A strengthening job market is probably helping buoy sentiment. Employers in the world’s largest economy have boosted payrolls by 1.13 million workers over the past six months, and the jobless rate dropped to 8.2 percent in March from 9 percent in September.
The improvement is visible in spending too. Retail sales rose more than forecast in March as Americans snapped up everything from cars and furniture to clothes and electronics. The 0.8 percent gain was almost three times as large as projected by the median forecast of economists surveyed by Bloomberg and followed a 1 percent advance in February, Commerce Department figures showed this week.
Toyota this month raised its forecast for 2012 industrywide U.S. sales of cars and light trucks, citing rising sentiment.
‘Starting to Move’
“We’re starting to see improvement in consumer confidence and, combined with rising fuel prices and aging vehicles, the market is starting to move,” Bob Carter, Toyota’s group vice president for U.S. sales, told reporters on April 5 at the New York auto show. “It’s happening quicker than anyone thought.”
Rising gasoline prices are bringing buyers into showrooms looking to replace their older cars with more fuel-efficient models, Carter said.
The recent leveling off in fuel costs may be helping to underpin consumer attitudes. The average price of a gallon of regular gasoline at the pump was $3.90 on April 17, down from a 10-month high of $3.94 reached April 5.
“Stalling gas prices are a potentially positive element,” said Langer. “A break in the run-up of gas prices could encourage gain in consumer sentiment.”
Bed Bath & Beyond, a home decor and housewares retailer, reported this month an increase in earnings for the quarter ended Feb. 25 that topped analysts’ estimates. The Union, New Jersey-based company, along with other retailers, may have benefited from favorable weather during the holiday season.
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers 18 years old 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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