Americans in January became the least pessimistic about the economic outlook in five months amid signs the expansion was gaining momentum heading into 2014.
The gap between positive and negative expectations for the economy shrank to minus 5 this month, its best reading since August, from minus 11 in December, according to data from the Bloomberg Consumer Comfort Index released today. A decline in the weekly measure to a one-month low of minus 31 for the period ended Jan. 12 underscores the uneven improvement in sentiment.
Higher home values and stock prices (CME:ESH14) are driving gains in household wealth at the same time Washington makes progress on overcoming fiscal-policy hurdles that have held back growth. More hiring would help lift Americans’ spirits and underpin the consumer purchases that make up about 70% of the economy.
“Households are confident that the increase in overall economic activity is sustainable and expect gains in 2014,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The improvement in the labor sector, rising equity markets and a noticeable increase in total private credit creation at the end of 2013 has resulted in a more confident consumer.”
The monthly expectations survey showed 28% of respondents said the economy was getting better, up from 26% a month earlier. The share of those who said it’s getting worse declined to 33% from 37%. Thirty- nine% said it was staying the same, compared with 36% last month.
The monthly gauge has improved each month after reaching an almost two-year low of minus 31 in October, when lawmakers’ failure to agree on a budget resulted in a 16-day partial shutdown of the federal government.
The Senate agreed yesterday to a three-day stopgap spending bill while working on the details of a bipartisan compromise to fund the government through Sept. 30.
Other reports today showed fewer Americans filed for unemployment insurance last week, while inflation moved closer to the Federal Reserve’s goal. Claims for jobless benefits dropped by 2,000 to 326,000. The consumer price index increased 0.3% in December, the most since June, after no change a month earlier, according to the Labor Department.
Stocks fell, after the Standard & Poor’s 500 Index closed at a record, as investors scrutinized earnings at companies from Goldman Sachs Group Inc. to Citigroup Inc. The S&P 500 dropped 0.2% to 1,844.22 at 9:35 a.m. in New York.
The weekly Bloomberg comfort index declined from minus 28.4 the prior week, reaching the lowest level since the period ended Dec. 1.