Consumer comfort down
The Bloomberg Consumer Comfort Index fell to 40.5 in the week ended July 26, from 42.4 in the previous week. This marks the fourth straight week of decline in the index and the second lowest level since November last year. The latest data for the Bloomberg Consumer Comfort Index were released on July 30.
The Bloomberg Consumer Comfort Index gauges consumer sentiment based on survey respondents’ perceptions about three things:
- the state of the economy
- an evaluation of personal finance
- the timing of purchasing goods and services
The index is a four-week moving average and ranges from zero to 100. It’s based on a survey of 1,000 responses. The survey is conducted for Bloomberg by Langer Research Associates.
In the latest survey, respondents’ views on the state of the US economy fell to 30.4 from 32.2 in the previous week. The measure that reflects respondents’ opinions about the buying climate also dropped to 36.2 from 37.2 on a week-over-week basis. Personal finance sentiment fell to 54.9 from 57.8 in the previous week. The personal finance index dropped for the third straight week.
According to Bloomberg, consumer sentiment was down across all income brackets, except for those in the $40,000–$50,000 income group.
The drop in consumer sentiment in recent weeks stems from the Greece crisis and the impact of the economic slowdown in China.
Implications for department stores
A drop in the Consumer Comfort Index impacts consumer spending levels. Department stores like Macy’s (M) and Kohl’s (KSS) have been under pressure due to intense competition from off-price retailers like TJX Companies (TJX) and Ross Stores (ROST) as well as from online retailers.
In this scenario, a drop in consumer sentiment is an unfavorable indicator, which might further impact department store sales. Macy’s and Kohl’s together account for ~0.2% of the portfolio holdings of the iShares Core S&P 500 ETF (IVV).
In the next part of this series, we’ll look at the drop in the Conference Board Consumer Confidence Index in July.