Consumer Reports Index: Americans Hunker Down on Spending Now That the Holiday Shopping Binge Subsides

Improvements in Trouble Tracker, But Employment Still A Cause for Concern

YONKERS, N.Y., Feb. 9 /PRNewswire-USNewswire/ -- The recent holiday season showed some hope for a resurgence in the retail sector, but it appears consumers are back in the doldrums and not willing to spend their way out of the recession, according to the February Consumer Reports Index.

The Past 30-Day Retail Index for February, reflective of January activity, is at pre-holiday levels, declining to 10.9 from January's 14.1, which reflected December holiday shopping, a decline of 23%.

The Next 30-Day Retail Index, reflecting planned purchasing for February, plummeted to 6.9 from 8.9 the prior month, making it well below pre-holiday levels and the lowest level tracked since August 09 (7.5).  

The losses in the Past 30-Day Retail Index, reflecting purchases made in January versus the prior month, and were driven by personal electronics (23.6%, down 11.1% pts.), major home electronics (13.9%, down 1.9% pts.), and major home appliances (6.3%, down 3.3% pts.).  The drop in the Next 30-Day Retail Index for February was driven by a decline in consumer intent to purchase major appliances (5.7%, down 2.1% pts.) and personal electronics (13.2%, down 3.9% pts.).

Retail purchases may be dropping, but it seems Americans are faced with less financial difficulties.  The Consumer Reports Trouble Tracker showed real improvements, declining to 53.4 in February from 58.2 in January and its high of 68.7 in September.  The top issue facing consumers in February is the inability to afford medical bills or medications at 14.7%, up from 12.7% in January.  This issue is most common in the South (17.5%).

Consumer Reports Employment Index remains unchanged at 49.0 versus 49.3 in January, but there is a significant trend emerging. Over the past several months, the proportion of Americans reporting a job loss in the past 30-days steadily declined to 5.7% in February versus 7.8% in October; however Americans reporting starting a new job in the past 30 days has also declined to 3.8% in February from a recent high of 6.2% in September. Slow job creation remains a significant drag on the economy.

"The holiday season showed glimmers of hope for the economy, but it is clear through the retail index that consumers are now cutting back on spending," said Ed Farrell, director at the Consumer Reports National Research Center. "While the economy is improving gradually for consumers as witnessed by improvements in the Trouble Tracker, which points to a decline in financial difficulties, the level of job creation needed to fuel a consumer recovery has not developed, though the tide of job losses has been stemmed."

As a result of the overall mixed picture, the Consumer Reports Sentiment Index has remained unchanged in February (43.9) from January (44.1), while the Consumer Reports Stress Index is now at 59.9 on par with January (59.0), but down from December (63.0).  Regionally, the South and West were faring less well in February compared to the month prior while the Northeast and North Central were unchanged overall.

The Consumer Reports Index report, available at www.ConsumerReports.org, is comprised of five key indices: the Sentiment Index, the Trouble Tracker Index, Stress Index, the Retail Index, and the Employment Index. Here are the key findings:

Consumer Reports Sentiment Index:  43.9

• The Consumer Reports Sentiment Index remains unchanged for the month of February (43.9) relative to January (44.1).  The most optimistic consumers were ages 18-34 (50.2) and households with incomes of $100,000+ (53.0). The most pessimistic consumers were in households with income less that $50,000 (40.3) and Americans 65 or older (40.2).

The Sentiment Index captures respondents' attitudes regarding their financial situation, asking them if they are feeling better off or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse. The Sentiment Index can vary from a high of 100 to a low of 0.

Consumer Reports Trouble Tracker Index: 53.4

• The Consumer Reports Trouble Tracker Index has shown improvement over the past several months, falling to 53.4 in February from 58.2 in January. This is a continuation of a downward trend from September (68.7). The key financial difficulties faced by consumers this month included:
  • Unable to afford medical bills or medications (14.7%)
    • Most common in the South (17.5%)
  • Credit card increased interest rate, penalty fees, etc. (9.3%, down from 14.4% the prior month)
  • Missed payment on a major bill – not mortgage (8.7%)
  • Lost or reduced healthcare coverage (7.5%)
  • Lost job (5.7%)
• Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days:
  • 24.3% have been unable to afford medical bills or medications
  • 6.8% lost their job or were laid off
  • 10.1% lost or have reduced healthcare coverage
  • 14.6% missed a payment on a major bill (not mortgage)

The Consumer Reports Trouble Tracker focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered. The negative events include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest-rate increase, penalty fees, reduced lines of credit or other changes in credit-card terms, job loss or layoffs, reduced healthcare coverage, or the denial of personal loans. The Consumer Reports Trouble Tracker Index is then calculated as the proportion of consumers that have experienced at least one of the negative events comprising the index multiplied by the average number of events encountered.

Consumer Reports Retail Index:  Past 30-Day - 10.9, Next 30-Day - 6.9

• As expected Consumer Reports Past 30-Day Retail Index declined to 10.9 from January's 14.1, which reflected December holiday spending.  
• Consumer Reports Next 30-Day Retail Index for February (6.9) are well below pre-holiday levels and below the lowest levels tracked to date in August 2009 (7.5). This index was dragged down due to the drop in interest to purchase major appliances (5.7%, down 2.1% pts.) and personal electronics (13.2%, down 3.9% pts.).
• Among retail categories not included in the index (new car, used car, and new home), past 30-day purchases of new cars (2.5%) and used cars (5.8%), reflect January activity, and were up slightly from the prior month, as were new homes (2.6%). February's next 30-day planned purchases are unchanged from the prior month for new cars, used cars and homes.

The Consumer Reports Retail Index looks at consumer purchases in the past 30 days as well as the outlook for planned purchases in the next 30 days across several categories.  The Consumer Reports Retail Index represents the proportion of respondents that made a purchase in the following categories:  major home appliances, small home appliances, major home electronics, personal electronics, and major yard and garden equipment. The Retail Index is a weighted calculation. For example, a major appliance is of greater value than a small appliance. Because of their size and frequency, car and home purchases are tracked separately.

Consumer Reports Stress Index: 59.9

• The level of stress consumers feel they are under is down compared to prior months and the Stress Index is now at 59.9 on par with January (59.0) but down from December (63.0).

The Consumer Reports Stress Index captures attitudes regarding the amount of stress consumers feel compared to a year ago. It asks whether they are feeling more stressed or less stressed. When the Stress Index is more than 50, consumers are feeling more stress and when it is below 50 they are feeling less stress compared to a year ago. The index can vary from 100 (Total Stress) to a low of 0 (No Stress).

Consumer Reports Employment Index: 49.0

• The Employment Index stands at 49.0 for January, reflective of net job losses in the prior 30 days, and was on par with January (49.3). In the past 30 days, 5.7% reported losing their job versus 3.8% starting a new job.

The Consumer Reports Employment Index examines the change in employment of those that reported starting a new job versus those that have lost their job or were laid off in the past 30 days. An index below 50 indicates more jobs were lost than gained, while a score more than 50 indicates more jobs were gained than lost in the past 30 days.

For more information regarding the Consumer Reports Index visit www.ConsumerReports.org.

The Consumer Reports Index, conducted by the Consumer Reports National Research Center is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,263 interviews were completed (1,013 households, 250 cell phones) among adults aged 18+. Interviewing took place between January 28 and January 31, 2010. The margin of error is +/- 2.8 points at a 95% confidence level. The complete index report, methodology, and tabular information are available. Contact: C. Matt Fields, 914.378.2454, [email protected].

FEBRUARY 2010

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SOURCE Consumer Reports