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. Since May, this has been adjusted and is now presented on a scale of zero to 100 rather than the previous minus 100 to 100, with the midpoint shifting to 50.
The Bloomberg Consumer Comfort Index fell this week for the first time in more than a month, ending its best quarter since the last U.S. recession began at a level of 36.4. The gauge averaged 35.8 from April through June, the highest quarterly reading since the last three months of 2007. Each of the three components of the comfort index fell in the first week, with Americans’ view of the buying climate down 1.7 points, their assessment of personal finances decreased to down 0.2 points, and their opinion on the state of the economy was off by 0.1 points from the week before.
The Consumer Comfort index continues to be below its pre-recession levels of just above 50, and reflects the implications of a long period of very slow growth in the economy. 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 – although even at its worst it never came close to the depths of the 1930s. As business investment, business startups, labor force participation and hiring continue to be stagnant (even though unemployment statistics are falling) Keynesian approaches to the economy like huge monetary and fiscal stimulus efforts will show no impact. This is something that those working in most industries need to keep in mind when looking at expansion plans. In addition, even though the economy is likely to continue to improve over the next two and maybe even three years, the United States will be entering its next recession with a consumer population still feeling the discomfort from a long-past downturn.
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