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Business Title: Consumer Comfort in U.S. Climbs to Highest Level in Six Months Consumer confidence in the U.S. reached a six-month high last week as more Americans said it was a good time to shop. The Bloomberg Consumer Comfort Index rose to minus 34.8 in the week ended Oct. 14, the highest level since April, from minus 38.5 the previous week. The monthly expectations gauge improved to minus 7 in October, the best reading since May. Signs the housing recovery is gaining momentum, rising stock prices and a falling jobless rate may be making consumers feel better about their financial situation. The boost in optimism may help sustain recent gains in household spending, which makes up about 70 percent of the economy. “Consumer sentiment is possibly emerging from a five- yearlong hibernation due to the long-awaited recovery in the housing market, rising equity prices and the slow improvement in the labor market,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Stabilizing, and in some places appreciating, home prices are “surely bolstering the confidence of many Americans that have watched their primary capital investment depreciate for years.” A separate report today showed more Americans than forecast filed applications for unemployment benefits last week, reflecting an unwinding of adjustments for seasonal swings at the start of a quarter. Jobless claims increased by 46,000 to 388,000 in the week ended Oct. 13 from a revised 342,000 the prior period that was the lowest since February 2008, according to Labor Department data. Stocks dropped after the Standard & Poor’s 500 Index’s biggest three-day rally in six weeks, depressed by the jump in claims. The 500 Index fell 0.2 percent to 1,457.71 at 9:40 a.m. in New York. All three of the comfort index’s components increased. The barometer of the state of the economy increased to minus 67.9 from minus 71.4 the previous week. The index measuring Americans’ views of their personal finances rose to minus 0.1 from minus 3. The buying climate gauge climbed to minus 36.4, also the highest since April, from minus 41 the previous week. The monthly expectations measure advanced from a minus 8 reading in September. Thirty percent of respondents said the economy is getting better, the most since March. At the same time, the share of Americans who said the economy is getting worse also climbed, rising to 37 percent from 34 percent the prior month. A decrease in the jobless rate to a three-year low of 7.8 percent in September may help explain why the Bloomberg comfort index has climbed in seven of the past eight weeks. Separate reports this week added to signs the housing industry may be on the road to recovery, also giving Americans relief. Housing starts in the U.S. climbed 15 percent in September to reach a four-year high, Commerce Department data showed yesterday. Building permits jumped to highest level since July 2008. Builder sentiment was the strongest since June 2006, the National Association of Home Builders/Wells Fargo reported earlier this week. The improvement in confidence comes less than a month before Americans head to the polls. Incumbent Barack Obama, a Democrat, is trying to make the case that his policies will best boost the world’s largest economy, while Republican challenger Mitt Romney says the president is at fault for a lack of vigor in economic growth. The advance in confidence has recently turned bipartisan. Sentiment among Democrats has climbed 13.6 points since the first week of September, and 19.7 points among Republicans. The gauge for independents has advanced 5.2 points and remains the lowest of the three. “Since independents are the customary swing voters in national elections, their continued economic disaffection may counter any impact of improvements that have occurred most steeply among partisans on both sides,” said Gary Langer, president of New-York based Langer Research Associates, which compiles the index for Bloomberg. Another question is whether the rise in confidence is “high enough for an incumbent president to win re-election,” Langer said. Compared with previous elections, the comfort index is neither low enough to signal a defeat for the sitting president, nor high enough for him to secure victory. The gauge was at minus 11 in mid-October 2004 when President George W. Bush was re-elected, and minus 5 when Bill Clinton was returned to office in 1996. It was at minus 48 in 1992 when George H.W. Bush failed in his bid for a second term. Men, college graduates, homeowners and full-time workers are among the demographic groups making the biggest strides in confidence in recent weeks, today’s report showed. In addition, sentiment among Americans at least 65 years old climbed last week to the highest level since 2007. Other indicators of consumer confidence have also been rising. The Thomson Reuters/University of Michigan preliminary October consumer sentiment index increased to the highest level in five years, before the recession began, according to a report last week. The economy is “choppy, but modestly moving in the right direction,” David Doft, chief financial officer of New York- based marketing communications firm MDC Partners Inc. (MDZ/A), said on an Oct. 11 conference call. “Jobs are improving a little. Housing prices seem to be improving a little. And these are the sort of things that I think marketers look at when they’re trying to predict future consumer behavior.” The increase in confidence may mean Americans spend more during the holiday season, the most important time of the year for retailers. November and December sales can account for as much as 40 percent of an individual retailer’s annual revenue, according to the National Retail Federation. Retail sales advanced 1.1 percent in September following a revised 1.2 percent increase in August, the best back-to-back- showing since late 2010, the Commerce Department said Oct. 15. The Bloomberg Consumer Comfort Index, compiled by Langer Research Associates in New York, conducts telephone surveys with a random sample of 1,000 consumers 18 and older. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; 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. The margin of error for the headline reading is 3 percentage points.
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