(Bloomberg) — Consumer sentiment in the U.S. climbed last week to the highest level since December 2007 as Americans grew more upbeat about the state of the economy, their financial well-being and the buying climate.
The Bloomberg Consumer Comfort Index advanced to 40.7 from 38.5 for the period ended Nov. 23, according to a report today. All three components improved last week, with the gauge of views on whether it’s a good time to shop rising to a seven-year high.
Labor market gains, record stock values and gas prices at four-year lows are boosting household sentiment in time for the holiday-shopping season. Fatter paychecks for lower-income earners would help households across all income brackets to make more purchases.
The recent improvement in confidence is “an indication, just in time for the holiday-shopping season, that consumers at last are feeling some impacts of economic recovery,” Gary Langer, president of Langer Research Associates LLC in New York, which produces the data for Bloomberg, said in a statement. It “offers hope to retailers heading into the holidays.”
Today’s sentiment report showed the buying-climate measure, which asks whether this is a good time to purchase goods and services, increased to 35.1, the highest since November 2007, before the last recession began, from 32.8 the prior period.
The gauge of personal finances advanced to 56.1, the highest since April 2008, from 54.4. Bloomberg’s weekly measure about the state of the economy climbed to 30.9, the highest since January 2008, from 28.2 the prior week.
Americans are finding relief at the gas pump. The nationwide average for a gallon of fuel at the pump was $2.81 on Nov. 24, the lowest in more than four years, according to AAA, the largest U.S. auto group.
Further job gains will help lift household spending into next year. The unemployment rate declined to a six-year low of 5.8 percent in October as the labor market stays on course for the strongest year of payroll growth since 1999, according to Labor Department figures.
Declining gas prices and improving sentiment about personal finances and the buying climate may explain why Cracker Barrel Old Country Store, Inc. is optimistic about the holiday season.
“Most restaurant concepts see a positive sales impact from lower gasoline prices, as that puts additional disposable income in the consumer’s wallet,” Lawrence Hyatt, chief financial officer of the Lebanon, Tennessee-based family-dining restaurant, said on an earnings call yesterday.
Sentiment among part-time workers gained more than seven percentage points last week from the prior period, rising to its highest since January 2008.
Confidence among homeowners and households earning more than $100,000 a year rose to the highest in seven years, reflecting increases in property and equity values.
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.