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Consumer confidence eroded for a fifth straight week, reaching the lowest level in more than a year as pessimism about the economy chipped away at views of conditions closer to home.
The Bloomberg Consumer Comfort Index fell in the period ended October 27 to minus 37.6, the weakest reading since October 2012, from minus 36.1. While the end of the 16-day federal government shutdown helped stabilise a measure of outlooks for the economy, households grew more pessimistic about their finances and the buying climate.
The slump in sentiment during the gridlock over the federal budget and debt ceiling has been deeper than both of the previous two shutdowns in 1995 and 1996. More pessimism among the jobless shows limited employment opportunities are weighing on consumer attitudes about making purchases.
Jobless claims fall
Another report on Thursday showed fewer Americans filed applications for unemployment benefits last week as a backlog in California's reporting cleared. Jobless claims decreased by 10,000 to 340,000 in the week ended October 26 from 350,000 the prior period, the Labor Department reported.
"The combination of fiscal follies in the nation's capital, slower economic activity and a deceleration in hiring clearly has impacted consumer confidence," said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. "While sentiment is likely to rebound in coming weeks, it may not rise to pre-crisis levels."
Another report today showed fewer Americans filed applications for unemployment benefits last week as a backlog in California's reporting cleared. Jobless claims decreased by 10,000 to 340,000 in the week ended Oct. 26 from 350,000 the prior period, the Labor Department reported. California said no claims last week represented applications from prior weeks, a Labor Department spokesman said as the figures were released to the press.
Shares Drop
Stock fell after the Federal Reserve statement yesterday fueled speculation it will cut stimulus in coming months and investors assessed corporate earnings. The Standard & Poor's 500 Index dropped 0.1 percent to 1,761.88 at 9:38 a.m. in New York.
Two of the Bloomberg index's three components worsened last week. The buying-climate gauge fell to minus 41, the weakest since June, from minus 38.3. The barometer for personal finances decreased to minus 3.8, the worst reading since January, from minus 2 the week prior.
The measure of Americans' current views on the economy was little changed at minus 68, the second-weakest reading since October 2012, from minus 68.2. Some 42 percent of respondents said the economy was in "poor" shape, the most since September 2012.
The Bloomberg consumer comfort gauge has declined 9.5 points since Sept. 22. In the period around the first of two 1995-1996 government shutdowns, that lasted five days in November 1995, the index fell 5 points. During the second, the measure lost 8 points, half of them in the two weeks after the 21-day shutdown ended Jan. 6, 1996.
Slowing Employment
The Bloomberg comfort gauge has dropped since reaching a more than five-year high of minus 23.5 in August, indicating a slower pace of employment is also to blame. Today's report showed sentiment among the unemployed fell last week to the lowest level in almost seven months.
Those with jobs have also been shaken. The sentiment index for the employed declined last week to the lowest point since February.
Companies added 129,000 workers on average from July through September, down from 201,000 in the first six months of the year, Labor Department data show.
Private employment, which excludes government agencies, grew by 130,000 in October, the fewest in six months, the ADP Research Institute in Roseland, New Jersey, reported yesterday.
Consumer Spending
Some consumers are cutting back on non-essential purchases. Las Vegas-based Caesars Entertainment Corp., the largest owner of casinos in the U.S., said fewer Americans have been making trips to its regional locations.
"Generally in retail experiences across the country, people are not as active as they've been in prior years," Gary Loveman, chairman and chief executive officer of Caesars, said on an Oct. 29 earnings call. "That's a troubling trend."
At the same time, higher home and stock prices, along with lower fuel costs, are sustaining consumer spending, which accounts for about 70 percent of the economy.
Home prices in 20 U.S. cities climbed in the 12 months through August by the most since February 2006, according to the S&P/Case-Shiller index. The S&P 500 has advanced almost 24 percent this year through yesterday.
Cheaper gasoline is also providing some relief. The average cost of a gallon of regular-grade gasoline dropped to $3.28 on Oct. 29, the lowest this year, according to data from AAA, the country's largest auto group. Since the end of August, fuel prices have tumbled 31 cents per gallon.
Retail Sales
A report earlier this week showed consumers were still spending in the month before the government shutdown. Retail sales excluding autos increased 0.4 percent after a 0.1 percent gain in August.
Today's confidence figures showed the widest gap in three months between the highest- and lowest-earning groups surveyed. The gauge for those earning at least $100,000 a year was little changed at 13.7. For those with annual incomes less than $15,000, sentiment declined to minus 69.3 from minus 66.4.
Confidence among political independents fell to minus 45.7, the lowest since September 2012. The reading for Republicans was the weakest since August.
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.
