Consumers’ outlook on U.S. economy improves to a five-month high

Components Decline

All three components of the weekly comfort index -- views of the economy, finances and whether it’s a good time to shop -- declined.

The gauge assessing Americans’ views on the current state of the economy dropped to minus 60.1 from a three-month high of minus 55.9 the prior week.

The measure of consumers’ views on their personal finances fell to 2, its lowest reading since November, from 2.6. The buying-climate index decreased to minus 34.9 from minus 32.

The improvement in the monthly expectations gauge may in part reflect higher home values. The S&P/Case-Shiller index of property prices in 20 U.S. cities climbed 13.6% in October from a year earlier, the biggest 12-month gain since February 2006, according to a Dec. 31 report from the group.

Retail sales rose in December, capping what may have been the strongest quarter for consumer spending in three years, even as frigid temperatures kept some Americans from brick-and-mortar stores.

Retail Sales

Purchases increased 0.2% after a 0.4% advance in November, Commerce Department figures showed earlier this week. Excluding a drop in auto demand that vehicle makers also partly attributed to the bad weather, sales jumped by the most in almost a year. Last month was the coldest December since 2009 and snowfall was 21% above normal, according to weather- data provider Planalytics Inc.

Economists are also seeing brighter prospects ahead, raising projections this month for 2014 growth and consumer spending. The world’s largest economy will expand 2.8% this year, according to the median estimate of economists in a Bloomberg survey conducted Jan. 10-15. That compares with a 2.6% forecast in a December poll. Consumer spending growth will average 2.6% in 2014, up from the 2.4% forecast in last month’s survey.

“As we start the new year, I’m excited about the opportunities ahead for our country,” John Stumf, chief executive officer at Wells Fargo & Co., said on a Jan. 14 earnings call. “The unemployment rate has declined, GDP growth accelerated, and consumer confidence is near a five-year high.”

Federal Reserve

Fed policy makers, meeting Jan. 28-29, will consider labor market gains as they debate further reductions in monthly asset purchases meant to stimulate the expansion.

Payrolls rose by 74,000 workers, the smallest gain in almost three years, figures from the Labor Department showed last week. The advance followed a 241,000 jump in November. The unemployment rate declined to 6.7%, the lowest since October 2008, as more people left the labor force.

The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, conducts telephone surveys with a random sample of 1,000 consumers ages 18 and older. Each week, 250 respondents are asked for their views on the U.S. economy, personal finances and buying climate. The margin of error for the headline figure is 3 percentage points.

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.

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