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Consumer Confidence in U.S. Fell Last Week to Two-Month Low

Jan. 30 (Bloomberg) -- Consumer confidence dropped last week to the lowest level in two months as more Americans said it was not a good time to shop.

The Bloomberg Consumer Comfort Index declined to minus 31.8 in the week ended Jan. 26 from minus 31 reading the prior period. The buying-climate gauge slumped to a three-month low.

Retreating stock prices are probably damping sentiment among upper-income groups, while higher gasoline costs at the pump hurt the nation’s lowest earners. Bigger gains in wages and employment could provide the needed boost to confidence that encourages households to sustain spending, which accounts for almost 70 percent of the economy.

“We’re seeing the public respond to volatility in equity markets and slightly higher gasoline prices,” said Joe Brusuelas, a senior economist for Bloomberg LP in New York. “Given the ongoing sluggish wage environment, it’s not a shock that consumer confidence has cooled.”

The economy expanded at a 3.2 percent pace in the fourth quarter as consumer spending climbed the most in three years, a report from the Commerce Department also showed today. The annualized gain in gross domestic product matched the median forecast in a Bloomberg survey and followed a 4.1 percent advance in the prior three months.

Applications for unemployment benefits rose more than forecast last week to the highest level in more than a month, partly reversing a post-holiday slump, data from the Labor Department also showed today. Jobless claims climbed by 19,000 to 348,000 in the period ended Jan. 25, which included the Martin Luther King holiday. The median forecast of 55 economists surveyed by Bloomberg projected 330,000.

Shares Climb

Stocks rebounded, trimming the worst January loss in four years, as earnings beat estimates at companies from Facebook Inc. to PulteGroup Inc. The Standard & Poor’s 500 Index climbed 0.8 percent to 1,788.5 at 9:42 a.m. in New York.

The Federal Reserve yesterday said it would continue trimming stimulus. Citing improvement in the labor market, the central bank will reduce monthly bond buying to $65 billion from $75 billion.

An assessment of American’s views of current economic conditions rose to minus 57.5, tying the 2013 average, from minus 58.1, today’s report showed.

The gauge measuring views of their personal finances rose to 2.5 from 1.8 the prior week. This is the 10th week the measure is positive.

Buying Climate

The buying-climate index fell to minus 40.5, the weakest since early November, from minus 36.7 prior week, according the report. It marked its biggest slump since August.

“It would not be surprising if the traditional post- holiday credit hangover is modestly impacting overall confidence as consumers pay down debts,” Brusuelas said.

An improvement in confidence would raise the odds that consumer spending will sustain gains. Household purchases jumped 3.3 percent at an annualized rate in the fourth quarter, the biggest gain in three years, today’s GDP report also showed.

Gains in property values are probably helping buoy spending. The S&P/Case-Shiller index of home prices in 20 U.S. cities rose in the 12 months through November by the most in almost eight years, a Jan. 28 report showed.

The average price of a gallon of regular gasoline was $3.28 last weekend, according to AAA, the nation’s largest auto organization. While down from $3.32 at the end of last year, the price is still above the 2013 low of $3.18 in November.

Income Levels

Sentiment for those making less than $15,000 a year dropped to the lowest reading since September 2012, falling to minus 77.1 from minus 68 the prior week. For the nation’s highest earners, those making more than $100,000 a year, confidence dropped to a four-month low of 13.1 from 13.7 the previous week.

Nonetheless, the gap between the lowest and highest income groups was the biggest since 2010.

Growth in confidence among those at the lower to middle ends of the income scale could provide a boost in sales for companies such as International Speedway Corp., which operates the Daytona International Speedway.

“While consumer sentiment regarding general economic conditions appears to be rebounding from the dip around the government shutdown, consumers remain tentative with regards to optimisms surrounding their own financial stability,” John Saunders, president of the Daytona, Florida-based company, said on a Jan. 28 earnings call. “An upturn in this aspect, along with a more balanced and sustained recovery reaching mid- to lower-income households is what will signal a true tailwind for ticket sales.”

Regional Differences

Regionally, confidence rose in the Northeast and the South, and declined in the Midwest and West.

Today’s survey contrasts with the Conference Board’s index, which advanced to a five-month high of 80.7 in January, the New York-based research group reported this week.

The Bloomberg Consumer Comfort Index 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.

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