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Bloomberg Consumer Comfort Index Finally Rises After 9 Weeks

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Bloomberg Consumer Comfort Index

The Bloomberg Consumer Comfort Index rose to 40.9 in the June 14 week from 40.1 in the prior week. The rise came in after falling for nine straight weeks. An improvement in the job prospects and housing market worked in the favor of the index. However, future gains in the index might be impacted by a rise in gasoline prices.

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About the index

The Bloomberg Consumer Comfort Index gauges consumer sentiment based on respondents’ perception about three variables:

  • the state of the economy
  • evaluation of personal finance
  • the timing of purchasing goods and services

The index is a four-week moving average. It ranges from zero to 100. It’s based on a survey involving a sample of 1,000 responses. The index is conducted by Langer Research Associates for Bloomberg.

In the latest survey, respondents’ views on the state of the US economy rose to 33.7 from 32.1 in the prior week. Respondents who felt that it’s a good time to purchase goods and services came in at 34.2—compared to 33.5 in the previous week. The sentiment about personal finances rose slightly to 54.8 from 54.7.

Implications for department stores

Department stores like Macy’s (M), Nordstrom (JWN), Kohl’s (KSS), and Sears Holdings (SHLD) sell discretionary items like apparel, accessories, and home furnishings. Generally, consumers’ spending on discretionary items is influenced by the level of optimism about the economic conditions. An improvement in the Bloomberg Consumer Comfort Index is a positive indicator for department stores.

Despite considerable improvement in economic conditions, consumer spending hasn’t been robust. Consumers are still looking for discount deals at off-price retail stores like TJX Companies (TJX), Ross Stores (ROST), and Nordstrom’s (JWN) Rack stores. To capture growth opportunities in the off-price space, Macy’s is now ready to launch four off-price Macy’s Backstage stores in the fall. Macy’s accounts for over 1% of the Consumer Discretionary Select Sector SPDR Fund (XLY).

Consumers’ optimism is impacted by job prospects in the economy. In the next part of this series, we’ll discuss a key parameter of the job market.

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