Gasoline costs have increased every day except one since mid-February, dealing a financial blow to households just as the labor market shows signs of improvement. The added burden of higher prices at the pump may restrain the gains in consumer spending that are bolstering the expansion.
“Rising gasoline prices extracted a toll,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Those at the lower end of the income ladder and those in the middle are being squeezed by rising costs of fuel and food, which does not bode well for discretionary spending.”
A Labor Department report showed claims for unemployment benefits increased last week from an almost three-year low. Applications rose by 26,000 to 397,000 in the week ended March 5. Economists projected claims would climb to 376,000, according to the median forecast in a Bloomberg survey.
The Bloomberg comfort gauge reflected worsening results for all three sub components.
The measure of personal finances fell to minus 3.7 last week, from an almost two-year high of 2.4, the report showed. Forty-eight percent of those polled held positive views on their financial situation, down from 51 percent the previous week.
A gauge of Americans’ views of the economy fell to minus 76.8 last week from minus 70.6. The share of households with a positive view of the economy dropped to 12 percent from 15 percent the prior week.
An index of the buying climate fell to minus 53, the lowest in a year, from minus 50.9. Those people saying it was a good time to buy needed items dropped to 24 percent from 25 percent the previous week.
The average price of regular gasoline at the pump climbed 14 cents to $3.51 a gallon in the week ended March 6, according to AAA, the nation’s biggest motoring organization. That followed a gain of 20 cents in the prior period, which was the biggest one-week jump since the aftermath of Hurricane Katrina in 2005.
“The repeated impact of forking over $50 or more per fill- up is not to be underestimated,” Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg, said in a statement. “Gas is not the only culprit,” he said, citing the average duration of unemployment, which rose in February to the highest level in records going back to 1948.
Gasoline prices and the comfort index have shown a strong inverse correlation since 2004, according to calculations by Bloomberg’s Brusuelas. Additionally, changes in the four-week average of claims for jobless benefits have been in sync with the comfort gauge about 72 percent of the time.
Macy’s Inc., the second-biggest U.S. department-store chain, is among companies watching the rising cost of fuel, which “will certainly affect some more than others,” said Chief Executive Officer Terry Lundgren. The shopper with less discretionary income “makes a decision of filling up (their) gas tank or buying a handbag,” he said.
“The customer who has the average household income of $75,000, $100,000, is back spending,” Lundgren said in the Cincinnati-based company’s March 9 presentation to investors. “And the customer who is well under that is spending even less than they spent before.”
Today’s report showed the index for Americans earning $40,000 to $49,900 a year fell to minus 51.5 last week, from minus 42.6 the week before.
The comfort measure for part-time workers declined to minus 52.5 from minus 42.9, while for those who are unemployed it dropped to minus 56.6 from minus 54.3.
Federal Reserve Chairman Ben S. Bernanke, in his semiannual testimony before Congress last week, said sustained rises in the prices of oil or other commodities “would represent a threat both to economic growth and to overall price stability.”
The Bloomberg Consumer Comfort Index is based on responses to telephone interviews with a random sample of 1,000 consumers aged 18 and over. Each week, 250 respondents are asked for their views on the economy, personal finances and buying climate; the percentage of negative responses is subtracted from the share of positive views and divided by three.
The comfort index can range from 100, indicating every participant in the survey had a positive response to all three components, to minus 100, signaling all views were negative. The margin of error for the headline reading is 3 percentage points.
The responses are broken down by participants’ sex, age, income level, race, region of residence, political affiliation, marital and employment status.