Feb. 7 (Bloomberg) -- Confidence among American consumers rose last week for the first time this year, a sign the strain on households from a higher payroll tax is easing.
The Bloomberg Consumer Comfort Index climbed to minus 36.3 in the period ended Feb. 3 from minus 37.5, which was the weakest since early October. The gain, reflecting advances by all three of the measure’s components, was the first in five weeks and within the margin of error of 3 percentage points.
A strengthening job market and higher stock prices are bolstering confidence after households absorbed a two percentage-point increase in the levy that funds Social Security. At the same time, climbing gasoline costs may prevent consumers from building on a fourth-quarter pickup in spending that helped offset a plunge in military outlays.
“An easing of policy tensions in Washington and sustained improvement in the labor market likely prevented further deterioration” in sentiment, said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “The gains appear somewhat tentative given rising gasoline prices, which are reducing discretionary consumption just as households are having difficulty adjusting to the resetting of the payroll tax.”
A report from the Labor Department showed claims for unemployment benefits remain at a level seen in the second half of 2012. Applications for jobless benefits dropped by 5,000 to 366,000 in the week ended Feb. 2. Economists forecast 360,000 claims, according to the median of 53 estimates in a Bloomberg survey.
Claims, after see-sawing in prior weeks as the government had trouble adjusting the data for seasonal swings, are settling at a level that signals there is little change in the pace of firings from last year. The data come after a report last week indicated employers are boosting payrolls at a faster pace as demand holds up.
Stocks retreated after a two-day advance in the Standard & Poor’s 500 Index. The S&P 500 fell 0.2 percent to 1,508.86 at 10:10 a.m. in New York.
The comfort index’s measure of personal finances climbed to minus 1.6, the highest level this year, from minus 3.8 the prior week. The index assessing Americans’ views on the current state of the economy improved to minus 63.6 from minus 64.1.
The buying climate index rose to minus 43.8 from the prior week’s minus 44.4, which was the weakest since September. Some 28 percent of those surveyed said it a good time to buy things they want and need, the fifth straight week it’s been less than 30 percent. In the final three months of 2012, the share was 30 percent or more.
Sustained gains in hiring will help support spending as fuel costs start to rise. Employers added 157,000 workers in January after a revised 196,000 gain in December and a 247,000 jump in November, a Labor Department report last week showed.
Since reaching a recent low of $3.22 on Dec. 19, the price of a gallon of gasoline has increased about 34 cents, according to date from AAA, the largest U.S. motoring organization.
In addition to progress in the labor market, lower borrowing costs are helping fuel spending on big-ticket items such as cars. Auto sales totaled 15.2 million at an annual rate last month after 15.3 million in December, according to data from Ward’s Automotive Group. The January pace compared with a 2012 average of 14.4 million.
Households boosted their purchases at a 2.2 percent annual rate in the final three months of 2012, up from 1.6 percent in the third quarter, Commerce Department data show.
Americans may also feel wealthier after a rally in stock prices. The S&P 500 climbed 5 percent in January, its biggest gain for the month since 1997.
At the same time, companies are waiting to see how consumers respond to the increase in the payroll tax, which Congress allowed to revert to its 2010 level of 6.2 percent from 4.2 percent starting in January. A worker earning $50,000 is taking home about $83 less a month because of the higher levy.
“Housing looks like it’s getting better and the stock market is getting better,” Hanesbrands Inc. Chairman Richard A. Noll said on a Feb. 5 earnings call. Retailers of the Winston- Salem, North Carolina-based maker’s products, which include Wonderbra and Champion apparel, “started being a little bit more cautious” coming into 2013, he said.
“I think everybody’s just a little wary about what’s going to happen with the tax increases and importantly the delayed tax refunds to consumers and is that going to impact spending,” he said.
The Internal Revenue Service did not begin accepting and processing 2012 returns until Jan. 30, later than its original Jan. 22 electronic filing start date, due to Congress’ last- minute Jan. 1 tax deal. That, combined with the IRS’ efforts to prevent fraud, could slow refunds.
The Bloomberg comfort report showed the sentiment gauge for those making $15,000 or less a year climbed to minus 52.6, its best reading since late 2008, from minus 54.5. Sentiment among those making more than $100,000 a year increased to 2.9 from minus 1.3 the prior week.
A gauge of sentiment among young adults, those between 18 and 34, decreased to lowest level since early September.
Confidence among men was the weakest since October and sentiment among part-time workers fell to a three-month low.
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.