WASHINGTON: Consumer confidence advanced last week to the highest level in more than five years as Americans’ views on the economy, personal finances and spending improved.
The Bloomberg Consumer Comfort Index rose to minus 23.5 for the period ended August 4, its strongest reading since January 2008, from minus 27 a week earlier. All income groups save one staged gains, with the biggest advances coming at the lower end of the pay scale.
The broadening of the increases to include those with the smallest paychecks signals the job market is thawing for a bigger share of households, which will help put spending on sounder footing. Nonetheless, even faster job and income growth will be needed to encourage a pickup in consumer purchases after a second-quarter slowdown.
“It shouldn’t be surprising that people are feeling more upbeat and confident, particularly with respect to their financial conditions,” said Richard Yamarone, a senior economist at Bloomberg LP in New York. At the same time, the recent pace of consumer spending indicates a “steady-as-she- goes environment” for the economy.
Another report showed the fewest workers since before the recession applied for unemployment benefits over the past month. The number of jobless claims in the four weeks ended August 3 dropped to 335,500 on average, the least since November 2007, according to the Labour Department.
The Bloomberg comfort index has foreshadowed changes in other measures. The Thomson Reuters/University of Michigan final index of consumer sentiment rose in July to its highest level in six years, a report showed on July 26. All three gauges in the Bloomberg index advanced. Consumers had a more optimistic view of the state of the economy, as the measure improved to minus 45.1, the strongest reading since January 2008, from minus 49.8 the prior week.
An index of Americans’ views of their personal finances rose to 6.6, the second-highest level since April 2008, from 4.2. The measure has been positive for 17 consecutive weeks. A gauge of the buying climate climbed to minus 32, its highest since early May, from minus 35.4 as more consumers said the time was right to buy needed items.
Historically low borrowing costs are supporting homes sales and boosting property values. The S&P/Case-Shiller index of home prices in 20 US cities climbed 12.2 percent in May from the same time last year, the biggest 12-month gain since March 2006, a report showed last month.
Labour Department data last week showed uneven improvement in the job market as employers added fewer workers than forecast in July, while the jobless rate fell to a four-year low as more Americans found part-time positions. Payrolls rose by 162,000, the least in four months, and unemployment fell to 7.4 percent from 7.6 percent.
Consumer spending, which accounts for 70 percent of the economy, rose at a 1.8 percent annualized pace in the second quarter, down from a 2.3 percent rate in the first three months of the year, according to Commerce Department data.
The measure for households earning less than $15,000 improved for a third week, to minus 53.1 from minus 64.5.
WP-Bloomberg
