The Bloomberg Consumer Comfort Index was created in 1985. It measures perceptions on the state of the economy, personal finances and whether it’s a good time to buy goods or services. The index is updated weekly, making it a timely sentiment gauge. The index is based on a telephone survey of 1,000 adult consumers. Each week, 250 respondents are asked for their views on the U.S. economy, personal finances and buying climate. The percentage of negative responses is subtracted from the share of positive views and divided by three. The index is based on the average of responses over the previous four weeks and can range from a high of 100 to a low of minus 100.
The Bloomberg Consumer Comfort Index climbed to minus 27.4 in the week ended December 22. This was the fifth straight gain and the strongest reading since August. According to Bloomberg, Americans stayed upbeat about economic prospects amid gains in household wealth, which reflect higher home values and record stock prices, and an improving labor market. This reflects some optimism after members of Congress struck a budget deal – the first bipartisan budget produced by a divided Congress in 27 years.
The buying-climate index jumped to minus 31.8 from minus 35.5, the highest since the week ended May 5, while the index of the current state of the economy rose slightly and the measure of consumers’ views on their personal finances advanced from 4.2 to 6.4, the highest since early August.
The Consumer Comfort index has been rising fairly steadily since January 2012, but is still at levels far below those prior to the recession.
That said, the index has fallen ever since the 9/11 terrorist attacks, and was 30 points lower than pre 9/11 even at the height of the economy just before the financial meltdown. This long term “depression” has not been seen in the country since the 1930s, and has continued for a longer period than the Great Depression. Economists of nearly all perspectives believe that there is an animal or entrepreneurial spirit that drives the economy and this long term negativity seems to be having an effect. Business investment, business startups, labor force participation and hiring are all showing long term weakness that even huge monetary and fiscal stimulus efforts have not been able to overcome. This is something that those working in most industries need to keep in mind when looking at expansion plans.
As the economy improves in 2014 it is unlikely that this index will jump much and it will be very unlikely to reach the pre-recession levels of just above zero.
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