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Consumer comfort in U.S. improves to 5-week high on finances

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(Bloomberg) — Consumer confidence in the U.S. improved to a five-week high, buoyed by more positive views about personal finances and the buying climate.

The Bloomberg Consumer Comfort Index rose to 42 in the period ended Aug. 23 from 41.1 the week before. Survey interviews were largely completed prior to the slump in global equity markets over the past week, meaning upcoming reports will provide a better sense of how much the turmoil seeped into Americans’ psyche.

Thursday’s data indicate attitudes were on the mend in the weeks leading up to the volatility, bolstered by the creation of 211,000 jobs per month on average this year and cheaper gasoline prices that have boosted disposable income. Those pillars will need to remain intact to help consumers withstand the market swings, which have been ignited by fears of a bigger global economic slowdown.

“While the future’s never certain, consumer sentiment generally has weathered short-term market upheavals,” Gary Langer, president of a Langer Research Associates, which compiles the data for Bloomberg, said in a statement. “Many Americans simply take the markets in stride. Fundamentals including employment, wages and economic growth also interact strongly with confidence.”

Finances Improve

The personal finances gauge rose to 54.3 from 52.6, the biggest advance in eight weeks. The index tracking the buying climate, which indicates whether consumers think now is a good time to purchase goods and services, climbed to 37.2 from 36.5.

The measure of Americans’ views on the state of the economy improved to 34.6 from 34.2.

Part of the reason market volatility may have a limited effect on sentiment is that household ownership of such financial assets is modest, data from the Federal Reserve’s Survey of Consumer Finances show. Some 13.8 percent of Americans owned directly held stocks in 2013, while 8.2 percent had pooled investment funds and 1.4 percent held bonds.

That compares to 49.2 percent who owned retirement accounts in 2013, the data show.

Long-Term Investing

“While the market’s moves brought headlines this week, it’s worth nothing that Americans tend to hold equities through funds, on a long-term basis, with some expectation of volatility,” Langer said in the statement. Also households with “the most exposure tend to be better-off, and so better positioned for uncertainty.”

Sentiment improved in six of seven income brackets, with those earning $50,000 to $75,000 posting the biggest improvement. Confidence for households earning less than $15,000 increased for the first time since early July. It was little changed for those making $15,000 to $25,000.

Regionally, confidence in the Northeast jumped to the highest level in eight years, and it also rose in the South. Sentiment fell in the West and Midwest.

Thursday’s report corroborates the Conference Board’s sentiment measure, which climbed in August to the second-highest level in eight years as Americans held more favorable views of the labor market. The cutoff date for that survey was Aug. 13, also before the recent stock-market sell-off.