Consumer confidence fell to a five-week low as Americans’ views on the economy and the buying climate soured.
The Bloomberg Consumer Comfort Index declined to 36.5 in the period ended Sept. 7, the worst reading since the beginning of August, from 37.7 the week before. While attitudes about personal finances hovered close to a six-year high, views on the national economy were the dimmest since early June.
An increase in confidence probably depends on further progress in the labor market that would spur earnings growth for a broader share of the workforce. Higher incomes could help ignite a virtuous cycle of increased spending that leads to more hiring and a pickup in demand in the world’s biggest economy.
A brighter outlook on personal finances is keeping the index “out of serious trouble,” said Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg. “But its difficulties show the persistent economic challenges troubling the nation’s consumers.”
Beyond the measures of finances, which slipped to 53 from 54.2, the two other components in the Bloomberg comfort index declined. A gauge of Americans’ views on the current state of the economy fell to 25.3 last week from 26.7 in the previous period. A gauge of the buying climate, which shows whether this is a good time to purchase goods and services, decreased to a 10-week low of 31.2 from 32.1.
Another report today from the Labor Department showed jobless claims unexpectedly rose last week to a two-month high, interrupting a steady decrease to the lowest level since before the last recession. Applications for unemployment benefits climbed by 11,000 to 315,000 in the week ended Sept. 6.
U.S. stocks fell as energy producers slid with the price of oil and investors speculated on the timing of interest-rate increases. The Standard & Poor’s 500 Index (CME:SPZ14) declined 0.3% to 1,990.09 at 9:35 a.m.
As wage gains are slow to materialize, Americans are using every opportunity to pay down debt and rebuild nest eggs rather than spending. Household purchases fell 0.1% in July, the first drop in six months, after a 0.4% gain, Commerce Department figures showed last month. Incomes rose at the slowest pace of the year and savings climbed to the highest level since the end of 2012.
There are also signs that payroll growth may be moderating. Employers added 142,000 workers to their headcounts in August, the slowest gain this year, after a six-month hiring binge that’s put more than 1.4 million Americans to work, data from the Labor Department last week showed.
Fits and Starts
The housing industry is also advancing in fits and starts this year as tight credit and slow wage growth keep some prospective buyers out of the market. Purchases of new homes declined 2.4% in July to a 412,000 annualized pace, the slowest in four months.
Orders for new homes at Toll Brothers Inc., the largest U.S. luxury homebuilder, fell in the three months through July, and it lowered its forecast for sales this year.
“Without real urgency pushing buyers to make a decision, general industry demand continues to be impacted by uncertainty about the economy and world events, improving but fragile consumer confidence and reduced affordability due to rising prices and limited personal income growth,” Robert Toll, chairman of the Horsham, Pennsylvania-based company, said on a Sept. 3 conference call.
Today’s report showed sentiment fell in four of seven income brackets last month, with confidence among those making more than $100,000 dropping to the second-lowest level since February. Meanwhile sentiment among households making less than $15,000 a year rose 1.3 points to 25.3, the highest level since August 2013.
Among regions, the Midwest showed the biggest drop in sentiment last week, with the index falling 3.7 points to 36.6. Confidence in the Northeast fell to a five-week low and was little changed in the South and West.
The broader comfort index has averaged 35.8 for the year, its best since 2007.
The Bloomberg Comfort Index has been presented on a scale of zero to 100 since May, rather than the previous minus 100 to 100, with the midpoint shifting to 50 from zero. The change is also reflected in the gauge’s components. It doesn’t affect the measures’ relationship to each other or their correlation with other economic indicators. Historical data has been revised and analysis of trends, values and other variables also aren’t affected.
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