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Americans’ outlook for U.S. economy soars to two-year peak

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(Bloomberg) — Americans’ expectations for the economy in October climbed to the highest level in almost two years as a pickup in hiring, falling gasoline prices, and low borrowing costs heartened households.

A measure tracking the economic outlook climbed to 51 this month, the strongest since November 2012, from 41.5 in September, data from the Bloomberg Consumer Comfort Index showed today. The weekly sentiment index was little changed at 36.2 for the period ended Oct. 12 from 36.8.

The lowest jobless rate since 2008 and the cheapest gasoline costs in a year probably combined to lift households’ spirits about the future. The upbeat mood may be difficult to sustain as stocks slump and concern grows that the Ebola virus poses a wider health risk.

The “likeliest suspects” for the jump in expectations were the increase in hiring and the drop in gasoline prices, Gary Langer, president of Langer Research Associates LLC in New York, which complies the comfort index for Bloomberg, said in a statement. “Still the stock market last week sustained its largest one-week decline in more than two years.”

The 9.5-point jump in the expectations index was the biggest since May 2009, the month before the last recession ended. The share this month of those who said the economy was improving rose to 32 from 20, while the share who said the economy was getting worse fell to 30 from 38 in September.

The improving outlook this month was paced by gains among young, upper-income and single Americans. Those living in the Northeast and Democrats also registered gains.

Buying Climate

The weekly measure of views on the current state of the economy was little changed at 25.7 compared with 25.6 the prior period. The buying climate index fell to 33 from 33.8 as more people said now was a poor time to make purchases.

The Bloomberg gauge of personal finances index dropped to 50, its lowest since late May, from 51 in the previous period.

Cheaper fuel is probably giving consumers hope that their finances will improve. A gallon of regular fuel at the pump cost $3.18 on average as of Oct. 14, down from a high of $3.70 in April, based on data from AAA, the largest U.S. motoring group.

Further gains in the job market could encourage consumers to spend. The unemployment rate declined to 5.9 percent in September and employers added 248,000 workers to payrolls, the Labor Department reported earlier this month.

Industrial Production

Among other reports today, industrial production jumped in September by the most November 2012, driven by a surge at utilities and a rebound in manufacturing. The 1 percent advance in output at factories, mines and utilities exceeded the highest forecast in a Bloomberg survey and followed a 0.2 percent drop the prior month, Federal Reserve figures showed today in Washington.

Another report today showed the number of Americans filing applications for unemployment benefits unexpectedly dropped last week to the lowest level in 14 years. Jobless claims fell by 23,000 to 264,000 in the week ended Oct. 11, the Labor Department said in Washington.

Stocks fell as equities around the world continued a selloff amid deepening concern that global growth is slowing. The Standard & Poor’s 500 Index slumped 1 percent to 1,843.29 at 9:37 a.m. in New York.

Today’s report showed confidence among those with household incomes of more than $100,000 rose to its highest since April and second-highest since 2007. It’s gained 8 points in the past five weeks.

Income Groups

Three of the four income groups that make up the share earning less than $50,000 showed a drop in comfort last week.

Earlier this month, J.C. Penney Co. cut its forecast for third-quarter same-store sales growth as purchases of full- priced items in September weren’t enough to make up for the effect of clearance merchandise. Yesterday, Wal-Mart Stores Inc., facing a retail slump and a decline in traffic to big-box chains, cut its annual sales forecast and predicted slower profit growth over the next three years.

Consumers “need to address their family and themselves, make a comfortable home and celebrate holidays and occasions, all within a budget, there is very little cushion,” Myron E. Ullman, chief executive officer of Plano, Texas-based J.C. Penney, said at an Oct. 8 analyst teleconference. “Despite the fact that consumer confidence is increasing, consumer spending is still flat, and it’s not clear when this will change. Moderate wage growth and the desire to increase savings are certainly at play here.” Older Americans

Confidence among consumers age 55 to 64 reached its highest since mid-April, while that among consumers 45 to 54 also improved. Sentiment for other age ranges fell.

Among regions, the Northeast led gains last week, with the index jumping 3.9 points to the highest since July 6, according to today’s figures.

Along partisan lines, confidence improved among Democrats, widening the gap with Republicans for the first time in five weeks. Democrats have been more confident than Republicans for almost a year, excluding one week in May.

The Bloomberg Comfort Index has been presented on a scale of zero to 100 since May, rather than the previous minus 100 to 100, with the midpoint shifting to 50 from zero. The change is also reflected in the gauge’s components.

The index doesn’t affect the measures’ relationship to each other or their correlation with other economic indicators. Historical data has been revised and analysis of trends, values and other variables also aren’t affected.


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