(Bloomberg) — Consumer confidence rose last week to a 7-year-high as falling gas prices and continued job growth burnish American attitudes.
The Bloomberg Consumer Comfort Index climbed to 41.7 in the period ended Dec. 14, the highest reading since mid-November 2007, from 41.3 the week before. Monthly views on economic expectations rose to match a two-year high.
The pick-up in sentiment is welcome news for U.S. businesses in the midst of the most important selling season of the year since falling gasoline prices will give consumers extra cash to spend during the holidays. More jobs and a pickup in wages will help maintain the expansion as geopolitical tensions and weakening growth abroad roil financial markets.
“These results comport with recent positive news in terms of job creation, wages, retail sales and gas prices, all just in time for the holiday shopping season,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in a statement.
The measure of Americans’ views on the current state of the economy rose to 32.5 last week, the highest since December 2007, from 31.8 the month before. A gauge of the buying climate, which shows whether now is a good time to purchase goods and services, climbed to 38.4, the highest since August 2007, from 37.3 in the previous period. The measure of personal finances, the strongest of the three components, edged down to 54.1 last week from 54.9.
The comfort index has averaged 36.5 for the year, the best since 2007.
Another report today showed fewer Americans filed for unemployment benefits fell last week as the economy’s continued improvement tempered dismissals. Jobless claims decreased by 6,000 to 289,000 in the week ended Dec. 13, the least since early November, according to figures from theLabor Department.
Stocks surged as investors were heartened by yesterday’s pledge from Federal Reserve policy makers that they’ll take their time in raining interest rates. The Standard & Poor’s 500 Index jumped 1.3 percent to 2,038.71 at 9:40 a.m. in New York.
The comfort report’s monthly economic expectations index rose to 51 from 47 the month before. Some 32 percent of Americans surveyed said the economy is getting better, matching the most since December 2012, while 30 percent said it’s getting worse. With wages rising slowly, plunging fuel costs are bolstering spending power for many Americans. The cost of living in the U.S. fell in November by the most in almost six years, while the average price of a gallon of regular gasoline was $2.48 on Dec. 17, the cheapest since 2009.
That should give Americans more to spend at places including McDonald’s Inc., which is experiencing its worst slump in domestic sales in more than a decade. November marked the 12th straight month without growth in McDonald’s home market, where it has more than 14,000 restaurants.
“America’s going to get a tax break with oil, gas prices going down, their phone bill going down,” Michael Andres, group president for McDonald’s U.S. unit, said at a Dec. 10 investor meeting. “We want to make sure that we have the pricing structure, we’ve got the offers; we want to give more people more reasons to come to McDonald’s to spend that money that they’ve got in their pocket now.”
Firming job growth may offer another reason to spend. Payrolls grew by 321,000 in November after a 243,000 jump the month before that was bigger than previously estimated, Labor Department data show. Monthly increases in hiring are on track for their best performance since 1999.
Sentiment rose in four of seven income brackets and fell in two. Those making less than $15,000 saw the biggest improvement, rising to 22.9 from 20.5, while attitudes for those making more than $50,000 were the most positive since August 2007.
Among regions, the South saw the biggest increase in confidence, rising to 39.3 last week from 37.1. Sentiment also rose in the Midwest, while it dropped in the Northeast and West.
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 change 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.