Consumer Comfort in U.S. Climbs to Highest in Four Weeks

Consumer confidence in the U.S. climbed to a four-week high as more Americans said their finances were in better shape.

The Bloomberg Consumer Comfort Index rose to minus 39.3 in the week ended May 27 from minus 42 in the prior period. The reading was little changed from this year’s average of minus 38.9. All three of its components — the economy, personal finances and buying plans — advanced.
Cheaper prices at the gas pump and a recent slowdown in dismissals may be helping stabilize sentiment, reducing the odds that spending will falter. At the same time, a recession in Europe threatens to discourage some U.S. companies from expanding headcounts, inhibiting the wage gains that would lay the groundwork for a bigger pickup in demand.

“While the recent decline in gasoline prices and slower pace of initial claims may have bolstered consumer comfort over the past week, overall sentiment remains in the doldrums,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Given the looming crisis in Europe and the weak pace of hiring in the economy, risks to the consumer outlook remain elevated roughly midway through 2012.”

The number of American applying for unemployment insurance payment rose to a five-week high, a sign progress in reducing joblessness may be stalling. First-time claims for jobless benefits increased by 10,000 to 383,000 last week, Labor Department figures showed today.
ADP Employment

Companies added fewer workers than forecast in May, a reminder the job market will take time to strengthen, a private report based on payrolls showed. The 133,000 increase in employment followed a revised 113,000 gain the prior month that was smaller than initially estimated, Roseland, New Jersey-based ADP Employer Services said. The median estimate in a Bloomberg News survey called for a May advance of 150,000.

The economy expanded more slowly in the first quarter than previously estimated, reflecting smaller gains in inventories and bigger government cutbacks revised Commerce Department figures showed today. Gross domestic product climbed at a 1.9 percent annual rate from January through March, down from a 2.2 percent prior estimate.

Stocks were little changed after the figures. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,313.73 at 9:36 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 1.60 percent from 1.62 percent late yesterday.

The Bloomberg measure of Americans’ views of their personal finances climbed to minus 6.4, the highest in five weeks, from minus 10.8. The 17 percent who said their finances are in “poor” shape is the fewest since April 22, the survey found.
View of Economy

The index on the current state of the economy advanced to minus 66.5 from minus 68.7, and a measure of whether consumers consider it a good time to buy climbed to minus 45.1 from minus 46.5.

After increasing 16 points in the first three months of the year, the overall measure of consumer sentiment gave back 12.2 points in the ensuing six weeks. The past two periods, the index has climbed 4.3 points.

“The movements mark the uncertain state of consumer sentiment amid the economic and political crosscurrents of a still-struggling economy in a presidential election year,” said Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg.

Readings lower than minus 40 are associated with “severe economic discontent,” he said. Since its inception in December 1985, the gauge has averaged minus 15.4.
Republicans, Democrats

The comfort index has been higher among Democrats than Republicans for 10 consecutive weeks, beating previous streaks of six weeks in late 1996 and five weeks in mid-2011. Sentiment has been 28.9 points lower on average among Democrats versus Republicans in data since 1990, according to the report.

Sentiment among independent voters improved to minus 40 last week from minus 44.4. Confidence among Democrats and Republicans also picked up.

The economy and unemployment are defining issues in this year’s presidential race. Republican Mitt Romney has questioned President Barack Obama’s ability to guide the recovery, while Obama has criticized the former Massachusetts governor for touting policies that helped trigger the recession.

The comfort index was minus 18 in May 2004 and minus 11 in May 1996, years in which incumbent presidents were re-elected, according to the report. This year’s gauge is closer to the minus 43 recorded in late May 1992, the year George H.W. Bush lost his bid for a second term.
Global Markets

“The key element ahead is not the level of consumer sentiment, but its trajectory,” Langer said, and that remains “an open question as the labor market struggles and global financial uncertainty darkens the horizon.”

Today’s report follows a Conference Board index that showed consumer confidence dropped to a four-month low in May, as Americans were more pessimistic about jobs.

A sentiment measure from Thomson Reuters/University of Michigan climbed this month to its highest since October 2007.

The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 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 index can range from 100, indicating every participant in the survey had positive responses to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points.