Bloomberg Consumer Comfort Index Plunges To Seven Month Low As Wealth Effect Trounced By Poverty Effect

Tyler Durden's picture

After staging a brief recovery in the last few weeks following the undeterred pursuit of the successful completion of Bernanke's wealth effect crusade (Russell at 36,000 or bust), consumer confidence has once again realized that while the rich are getting richer, it means jack for everyone else. As a result the Consumer Comfort index, which recently was moved from ABC to Bloomberg, has just plunged to a 7 month low, indicating comparable slides are coming in the other two reflexive market indicators, the UMich and the CONference Board. "Consumer confidence in the U.S. fell last week to the lowest level since August as more Americans became despondent over the economy. The Bloomberg Consumer Comfort Index dropped to minus 48.9 in the period to March 20 from minus 48.5 the prior week. The measure of the current state of the economy slumped to a 15-month low." And contrary to Central Planning assumptions that Americans are mostly idiots, the recent surge in gasoline prices to near 3 year highs was not missed: "“Given the rise in fuel and food costs, households are clearly indicating frustration over the need to reduce discretionary spending to meet demand for basic necessities,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Even better-off households are feeling the pinch of rising prices, primarily at the pump.”"

The latest re-depressionary chart:

And more from Bloomberg:

Record Low

The Bloomberg Comfort Index, with records dating back to December 1985, fell to a record low of minus 54 in November 2008, while the peak of 38 was reached in January 2000. Readings averaged minus 45.7 last year.
    
The latest results for the comfort index reflected worsening results for one of the three components.
    
A gauge of Americans’ views of the economy fell to minus 86 last week, the lowest level since December 2009, from minus 80.3 the prior week. The share of households with a positive view of the economy dropped to 7 percent from 10 percent.
    
The measure of personal finances improved to minus 5.5 last week from minus 7.7, the report showed. Forty-seven percent of those polled held positive views on their financial situation, up from 46 percent the previous week.
    
The buying-climate index rose to minus 55.1 from minus 57.4. Those saying it was a good time to buy needed items climbed to 23 percent from 21 percent.

Full-Time Workers

Today’s report showed the strengthening labor market is doing little to lift consumers’ moods. The confidence index for Americans with full-time jobs fell to minus 38.4 last week, the lowest level since August, while it improved for those who were
unemployed.

Jobless claims declined by 5,000 to 382,000 in the week ended March 19, Labor Department figures showed today, in line with the median forecast of economists surveyed by Bloomber News. The total number of people receiving benefits dropped to the lowest level in almost three years.
    
Sentiment among women dropped last week to the lowest level since October 2009, the comfort report also showed.
    
Although elevated, little change in fuel costs last week may have prevented the comfort index from dropping even more.
    
The average price of regular gasoline at the pump was $3.55 a gallon on March 20, compared with $3.56 a week earlier, the highest since October 2008, according to AAA, the nation’s biggest motoring organization. The price jumped 39 cents in the three weeks ended March 13.
Linked to Gasoline

“Consumer confidence paused this week after a two-week rout, continuing to march in time with the price of a gallon of gasoline,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. At the same time, the index is “uncomfortably near its historic low” of minus 54, he said.
    
Gasoline prices and the comfort index have shown a strong inverse correlation since 2004, according to calculations by Bloomberg economist Brusuelas. Additionally, changes in the four-week average of claims for jobless benefits have been in sync with the comfort gauge about 72 percent of the time.
    
Americans are paying more for staple food items like cereal, and costs may climb further in the next few months.
    
“In recent months we have announced a variety of pricing actions across our businesses,” Ken Powell, chief executive officer of General Mills Inc., the maker of Cheerios, said yesterday on a conference call. “Food manufacturers are managing through a period of rising and volatile costs for food ingredients and energy.”

Index’s Calculation

The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over. 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.
    
The responses are broken down by participants’ sex, age, income level, race, region of residence, political affiliation, marital and employment status.
    
Field work for the index is done by SSRS/Social Science Research Solutions in Media, Pennsylvania.