Bloomberg's US Consumer Comfort Gauge Falls to Lowest Since Recession

Thursday, 22 Sep 2011 01:24 AM

 

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Consumer confidence in the U.S. dropped last week to the weakest point since the recession ended in June 2009 as Americans’ views of the economy worsened.

The Bloomberg Consumer Comfort Index fell to minus 52.1 in the period to Sept. 18 from minus 49.3 in the prior week. Sentiment among men slumped to an all-time low. A monthly expectations gauge held at minus 34, the worst reading since March 2009.

Stock-market volatility linked to Europe’s debt crisis, declining home values and a lack of job creation help explain why the smallest share of Americans since February 2009 say the economy is improving. Federal Reserve officials yesterday employed another round of unconventional monetary policy to help shore up an economy showing “significant downside risks.”

“Readings at these levels are consistent with an economy that has best sharply decelerated and at worst slipped into recession,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “A crisis of confidence that corporate and political leadership are not up to addressing the problem in the labor market and broader economy is likely responsible for the new cyclical low.”

More Americans than forecast filed first-time claims for unemployment benefits last week, another report today showed. Initial jobless claims dropped by 9,000 to 423,000, the Labor Department said.

Stocks sank on concern global central banks are running out of options to prevent another recession. The Standard & Poor’s 500 Index declined 2.6 percent to 1,136.64 at 9:39 a.m. in New York.

State of Economy

The weekly comfort data showed declines in two of the index’s three components. The measure of Americans’ views of the current state of the economy dropped to minus 88.9 last week, the lowest since April 2009, while a measure of personal finances fell to minus 7.5 from minus 0.7.

The buying climate index was minus 59.9, little changed from the prior week when it reached the lowest level since October 2008, the month after the Lehman Brothers Holdings Inc. bankruptcy marked the start financial meltdown.

The Bloomberg consumer comfort gauge, which began December 1985, has been stuck below minus 40 -- the level associated with recessions or their aftermath -- since the end of February. It has averaged minus 45.6 this year, compared with minus 45.7 for 2010 and minus 47.9 in 2009.

To keep the economy from relapsing into a recession, the Fed said yesterday it will replace much of the short-term debt in its portfolio with longer-term Treasuries. The action “should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the Fed’s Open Market Committee said.

‘Significant Downside’

“There are significant downside risks to the economic outlook, including strains in global financial markets,” the Fed statement said.

The Bloomberg monthly measure of consumer expectations showed 12 percent of those polled said the economy is getting better, the lowest reading since February 2009. Forty-six percent said the economy was deteriorating.

“The public’s gloom is remarkable,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. The figures provide “yet more chilling results for Barack Obama, besieged in a storm of economic criticism.”

The Bloomberg weekly comfort index fell to minus 51.3 among men, and approached all-time lows among whites, homeowners and people with a high-school degree.

Higher Income

While the gauge for those earning more than $100,000 a year improved to minus 13.7 from minus 18.1, it was the eighth straight week of double-digit negative figures, the longest such stretch in two years.

Political independents grew more pessimistic, with sentiment plunging to minus 51.4 from minus 44.1. Gauges of sentiment among Democrats and Republicans improved.

Recent data have prompted some economists to raise the odds of a renewed recession. The economy generated no jobs in August, the worst reading since September 2010, retail sales were little changed and regional surveys of factory activity have signaled contraction.

A stagnant labor market is putting pressure on President Barack Obama, lawmakers and the Fed to spur job growth. Obama this month introduced a $447 billion jobs plan to boost payrolls.

Obama Doubts

A majority of Americans don’t believe Obama’s plan will help lower the unemployment rate. The downbeat assessment of Obama’s American Jobs Act reflects a growing and broad sense of dissatisfaction with the president. Americans disapprove of his handling of the economy by 62 percent to 33 percent, a Bloomberg National Poll conducted Sept. 9-12 showed. The disapproval number represents a nine-point increase from six months ago.

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.

© Copyright 2014 Bloomberg News. All rights reserved.

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