American consumers in 2013 were more upbeat than at any time in the previous six years as views on the economy, finances and the buying climate improved.
The Bloomberg Consumer Comfort Index averaged minus 31.4 for 2013, the highest since 2007, when it was minus 10.5. The weekly index fell for the first time since mid-November, dropping to minus 28.7 for the period ended Dec. 29, from minus 27.4.
An improved job market, higher stock prices and rising home values lifted sentiment at the end of the year and helped drive holiday retail shopping. Stronger wage and employment growth would help propel bigger gains in confidence and encourage Americans to boost spending, which accounts for almost 70% of the economy.
“Consumers were somewhat uneasy in the latest week, however, record stock market evaluations (CME:SPH14) and increased job creation has bolstered confidence levels from relatively low levels,” said Richard Yamarone, a senior economist for Bloomberg LP in New York.
Other figures today showed jobless claims declined last week to the lowest level in a month. Applications for unemployment benefits fell by 2,000 to 339,000 in the week ended Dec. 28, according to the Labor Department.
The job market continues to make progress. Payrolls grew by 195,000 workers in December after a 203,000 gain a month earlier, according to the median forecast in a Bloomberg survey of economists. Labor Department employment data are due Jan. 10.
Equity prices also are boosting Americans’ wealth, with the Standard & Poor’s 500 Index surging 30% last year, the most since 1997.
All three components of the comfort index cooled last week, led by a drop in buying climate, which fell to minus 33.2 from a seven-month high of minus 31.8 as fewer people said now is a good time to make purchases. Between early November and Christmas, the buying climate rating rose 8.8 points and it’s 4.7 points higher than the average for the year.
Americans’ views of their personal finances fell to 4.1 from 6.4. The gauge, which has been positive for six weeks, is 1.2 points higher than the 2013 average.
An assessment of current economic conditions fell to minus 57.1 from minus 56.8, today’s report showed, putting it 25.7 points below its long-term average.
“Buy-in on this measure is critical if consumer sentiment is truly to break out in 2014,” said Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg. “The job market is a key challenge. Even with its recent gains, unemployment remains high enough to make the recovery story a tough sell to many Americans.”