Consumer confidence in the U.S. declined to the lowest level in seven weeks as Americans turned more pessimistic about the economy.
The Bloomberg Consumer Comfort Index fell for a second week, to minus 31.5 in the period ended March 23 from minus 29. For the first time since early February, all three components of the gauge, which also includes measures of the buying climate and personal finances, decreased in the same week.
Higher prices at the gas pump and smaller paychecks for employees after inclement winter weather reduced hours combined to damp spirits among lower-income households. Faster job growth that sparks bigger wage gains would help spur more household spending, which makes up about 70 percent of the world’s largest economy.
“Rising gasoline prices, sluggish wage growth and the lagged impact of a reduction in hours worked have likely exacted a toll on consumer sentiment, especially down the income ladder over the past three months,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
Another report today showed fewer Americans than forecast filed applications for unemployment insurance payments last week, indicating the job market was improving. The number of claims for jobless dropped to 311,000 in the week ended March 22, the fewest since late November, from 321,000 the prior period. The median forecast of economists surveyed by Bloomberg projected 323,000.
Also today, a report showed the economy grew more rapidly in the fourth quarter than previously estimated as consumer spending climbed by the most in three years, showing the expansion had momentum heading into this year’s harsh winter. Gross domestic product grew at a 2.6 percent annualized rate from October through December, more than the 2.4 percent gain reported last month, according to Commerce Department data.
Stocks fell, with the Standard & Poor’s 500 Index dropping 0.5 percent to 1,843.51 at 9:40 a.m. in New York.
The Bloomberg measure of consumers’ views of current economic conditions declined to a six-week low of minus 53.3 from minus 49.6. The gauge of personal finances dropped to minus 2.3, the lowest level since early November, from 0.7 a week before. The share of Americans saying it’s a good time to buy fell to minus 39 from minus 38.1 in the prior period.
Rising energy costs are starting to take a toll. The average price of a gallon of regular gasoline was $3.54 on March 25, the highest since September, according to AAA, the biggest U.S. motoring group. In early February, the cost to drivers was as low as $3.27 a gallon.
That helps explain the increase in pessimism among Americans at the lower end of the wage scale. Sentiment deteriorated for all income groups earning less than $50,000 a year. Confidence declined in three of four regions, rising only in the Northeast.
Today’s figures also showed political disparities. The difference in sentiment readings for Democrats and Republicans was the widest on record. Republicans’ comfort dropped to the lowest in 13 months, while for Democrats, it improved to the highest level since August. Among independents, potential swing voters in this year’s mid-term elections, sentiment was the weakest in four months.
The reading for independents may be a “sign of trouble,” for Democratic candidates in elections later this year, Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in a statement.
“Economic frustration can damage incumbents generally, but also may be directed particularly against the incumbent president’s party in a midterm election year,” he said.
Confidence also declined last week for full-time workers, homeowners and men, today’s figures showed.
The outlook for the labor market will help determine sentiment, and a report earlier this month showed companies are adding more workers. Employment grew by a larger-than-forecast 175,000 in February, according to the Labor Department, a sign companies anticipate the economy will pick up after winter storms slowed growth in the beginning of the year.
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.