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As Bloomberg reported today, the Bloomberg Consumer Comfort Index dropped to minus 44.5 last week from the prior weeks minus 39.7, which was close to the highest in almost three years. 

Certain cohorts of the consumer are still suffering, irrespective of this two-year market rally.  Reflecting this stark reality, sentiment among those who are unemployed and those earning less than $50,000 per year suffered most in the weekly Bloomberg Consumer Comfort Index released today.  Rising gas prices, an all-to-gradually-improving but weak job market, and turmoil in MENA can easily shake consumers’ already fragile confidence in the economy.

The price of gas has increased every day except one since mid-February, dealing a big blow to households just as the labor market shows signs of improvement.  According to the Energy Department, The average U.S. household will spend about $700 more for gasoline in 2011 than it spent last year, bringing total motor fuel expenses up 28 percent to $3,235, based on an annual pump price of $3.61.

Today, a separate survey by BIGresearch, monitoring over 8,000 consumers on a monthly basis, lends credence to my theory that the Hedgeye Optimism Spread (difference between Conference Board Consumer Expectations and Consumer Present Situation Index) will begin to contract. 

According to BIGresearch “while the government is reporting a third consecutive month of declining unemployment, consumers are predicting an increase in pink slips, not paychecks…in March, nearly a third of respondents (30.0%) contends there will be “more” layoffs in the next six months, rising more than six points from February (23.7%). Half (51.1%) say that layoffs will continue at the “same” pace, down from 54.1% a month ago, while fewer than one in five (18.9%) are predicting a decline, falling three-plus points from last month (22.3%).”

Tomorrow, the University Of Michigan Survey of Consumer Confidence will be released with the preliminary data for March.  The Bloomberg survey for the March preliminary number is 76.4 versus the final February reading of 77.5.

Howard Penney

Managing Director

CONSUMER CONFIDENCE TOMORROW - bloomberg consumer comfort