By Elizabeth Dexheimer
WASHINGTON — Consumer confidence stayed near a three-month high last week, with more Americans saying it was a good time to make purchases even as they grew more pessimistic about the economy.
The Bloomberg Consumer Comfort Index fell to minus 38.5 in the week ended Oct. 7 from minus 36.9 in the prior period. The drop was within the gauge’s margin of error of 3 percentage points and ended a six-week upswing that was the longest since early 2006. The measure has been higher than minus 40, a level associated with recessions and their aftermath, for the last three weeks.
“Consumer sentiment appears to have stabilized, albeit at historically low levels,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. A drop in gasoline prices since the mid-September “likely boosted household perceptions of the buying climate despite clear signs of discontent over the direction of the economy,” he said.
Labor Department figures last week that showed the U.S. jobless rate at a three-year low of 7.8 percent in September may help explain an 8.9-point rise in the sentiment index since mid- August. At the same time, further improvement in the labor market may be needed to shore up confidence in an economy that 86 percent of those surveyed said was bleak.
Fewer Americans than forecast filed first-time claims for unemployment benefits last week, the Labor Department reported today.
Applications for jobless benefits dropped 30,000 to 339,000 in the week ended Oct. 6, the fewest since February 2008. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. One state accounted for most of the plunge in claims, a Labor Department spokesman said.
Two of the comfort index’s three components declined. The barometer of the state of the economy dropped to a four-week low of minus 71.4 from minus 68.7 the previous week. The index measuring Americans’ views on their personal finances declined to minus 3 from minus 0.4. The buying climate gauge was little changed at minus 41 from after minus 41.4 the previous week.
The share of respondents who had a “negative” rating of the economy was 21 percentage points above the long-term average. Less than half a percentage point, the fewest this year, said the economy is in “excellent shape.”
“There’s a long road ahead,” said Gary Langer, president of New-York based Langer Research Associates, which compiles the index for Bloomberg. “While it remains to be seen whether this late-year charge can sustain itself, gains in jobs are key.”
The Labor Department reported Oct. 5 that the unemployment rate dropped after holding above 8 percent for 43 straight months. Employers added 114,000 workers in September after a revised 142,000 gain in August that was more than initially estimated.
Thirty percent of respondents said it is a good time to buy things they want and need, the most since late June and 6 points below the long-term average. A stabilization of fuel prices may be helping.
Regular-grade gasoline was $3.81 on Oct. 9, according to AAA, the nation’s largest motoring organization. It reached a high in September of $3.87 a gallon.
Partisanship continues to shape Americans’ economic outlook less than one month before people head to the polls to elect either President Barack Obama or Republican Mitt Romney.
“It’s gone up and down, and I think that that’s going to continue in terms of the consumer sentiment for the next couple of months, certainly as we get through the election,” said Nigel Travis, chief executive officer of Canton, Mass.- based Dunkin Brands Group Inc., during a conference call on Oct. 2. “I think it all comes down to the election, what’s going to happen and certainty being something that the consumer is looking for.”
The confidence index among Democrats was higher than that of Republicans for the 29th straight week, a record in available data back to 1990. The index among Democrats declined to minus 28.6 from 25.9 the previous week. Republican sentiment fell to minus 36.5 from minus 34. Independents remain the most pessimistic, as a gauge of their sentiment held at minus 44.5.
Confidence among men rose to minus 34.2, the highest level since July. The gauge measuring sentiment of college graduates rose for a sixth week, to minus 23.9.
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.