Pella Chronicle

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November 21, 2013

Consumers' outlook improves after two-year low

WASHINGTON — American consumers became less pessimistic in November about the economic outlook as the effect of last month's partial government shutdown dissipated.

The gap between positive and negative expectations for the economy shrank to minus 14 from a two-year low of minus 31 in October, according to data from the Bloomberg Consumer Comfort Index released Thursday. The weekly measure of sentiment fell to minus 34.6 in the period ended Nov. 17 from minus 33.9.

Increased wealth from higher stock and home prices, cheaper gasoline and more employment opportunities are providing households with the means to boost purchases. A pickup in wage growth would provide an additional spark for spending, which accounts for almost 70 percent of the U.S. economy.

"Consumer sentiment has essentially reset compared to where it was prior to the government shutdown, which should assuage fears of a complete disaster during the holiday shopping season," said Joseph Brusuelas, a senior economist for Bloomberg LP in New York. Without bigger gains in wages, "it will be difficult for consumers to support spending beyond the modest levels observed in the third quarter."

The monthly expectations survey showed 23 percent of respondents said the economy was getting better, compared with 16 percent, the fewest in two years, who said so a month earlier. The share of those who said it's getting worse declined by 10 percentage points to 37 percent.

Two of the Bloomberg weekly gauge's three components weakened. The index of personal finances decreased to minus 2.1, the fifth negative reading in six weeks, from zero the prior week.

A gauge of Americans' view of current economic conditions fell to minus 63.7 from minus 62.5 the week before.

The buying-climate barometer rose to a five-week high of minus 38.2, as more households indicated that now is the time to make purchases. The gain may have reflected cheaper prices at the pump. A gallon of regular gasoline dropped to $3.18 on Nov. 11, the lowest level since February 2011, according to AAA, the biggest U.S. auto group.

Sales growth in categories like flooring and kitchens "reflects an emerging willingness among consumers to finally replace items that are worn or outdated, or to make significant enhancements to their homes," Lowe's Cos. Chief Executive Officer Robert Niblock said on an earnings call Wednesday.

Retail sales climbed in October by the most in three months, a report yesterday showed. The 0.4 percent increase exceeded the median estimate in a Bloomberg survey.

To build on the October gains, some retailers such as Best Buy Co. said they will have to rely on discounting to lure customers. Best Buy will face an "increasingly promotional environment" in the fourth quarter as it plans to match rivals' online prices this holiday-shopping season, Chief Financial Officer Sharon McCollam said Nov. 19.

Thursday's figures continued to show a divergence in attitudes between the highest- and lowest-earning groups. The sentiment reading for those making $100,000 or more a year increased to 17.3, while it was minus 51.4 for those with incomes less than $50,000.

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.

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