According to Bloomberg, Americans' confidence increased last week to the highest level since July 2007 as job gains and falling prices at the gasoline pump boosted attitudes about the economy and personal finances.
The Bloomberg weekly index of consumer comfort climbed to 47.3 in the period ended January 25 from 44.7, the biggest weekly advance since March 2010. A gauge of optimism about the economy has almost doubled since the end of September, while a measure of personal finances was the strongest since October 2007.
The data are the latest to show American households could potentially help the U.S. power past a global slowdown. Incomes, bolstered by plunging gasoline prices and the lowest unemployment rate since mid-2008, are driving consumer spending, which makes up about 70 percent of the economy.
The fewest Americans in 15 years filed applications for unemployment benefits during a holiday-shortened week that typically makes the data more volatile, another report showed. Jobless claims plunged by 43,000 to 265,000 in the week ended January 24, the lowest since April 2000, according to the Labor Department.
The Bloomberg measure of consumers' views of the national economy surged to 42.3, the highest since July 2007, from 38.9. A measure of personal finances jumped to 60.7 from 56.6, and the buying climate index increased to 39 from 38.5.
Bloomberg stated that lower energy prices and job gains are underpinning sentiment for most Americans. The cost of a gallon of regular gasoline was $2.04 on Wednesday, down from a high in April 2014 of $3.70, according to figures from AAA, the largest U.S. auto group.
Almost every demographic category registered gains in confidence last week. Sentiment among those 35 to 44 years old advanced the most. Full-time workers, homeowners, married adults and those in the western U.S. also posted gains.
Among income groups, those making in excess of $50,000 were more upbeat than at any time since August 2007, while those earning less than $15,000 grew more pessimistic for a fourth week as that gauge dropped to a six-week low. The index for Americans with incomes between $15,000 and $25,000 advanced to its highest since September 2007.
The Bloomberg Consumer Comfort Index is a weekly, random-sample survey tracking Americans' views on the condition of the U.S. economy, their personal finances and the buying climate. The survey was formerly sponsored by ABC News since 1985. Beginning in April 2014, immediate details of the report are available by subscription through Langer Research Associates which conducts the survey for Bloomberg. Publicly released details are available only after a significant delay after release of the headline number. In May 2014, Bloomberg changed the series range to zero to 100 versus earlier reports with a range of minus 100 to plus 100.
The pattern in consumer attitudes can be a key influence on stock and bond markets. Consumer spending drives two-thirds of the economy and if the consumer is not confident, the consumer will not be willing to spend. Confidence impacts consumer spending which affects economic growth. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. Since consumer spending accounts for such a large portion of the economy, the markets are always eager to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. It is easy to see how this index of consumer attitudes gives insight to the direction of the economy. The Bloomberg Consumer Comfort Index is produced by Langer Research Associates of New York. Each release includes results among 1,000 randomly selected adults, with breakdowns available by age, race, sex, education, political affiliation and other groups. The Index has significant long-term correlations, including on a time-lagged basis, with a variety of key economic indicators. The index, produced by Langer Research Associates in New York, is derived from telephone interviews with a random sample of about 250 consumers a week aged 18 or over, and is based on a four-week moving average of 1,000 responses. The percentage of households with negative views on the economy, personal finances and buying climate is subtracted from the share with positive outlooks. The results can range from zero to 100. Prior to May 2014, the data were reported in a range of minus 100 to plus 100.