Consumer Reports Index: Stress Increases and Consumer Sentiment Returns to Negative Territory

Employment numbers improve for the third consecutive month

YONKERS, N.Y., May 10, 2011 /PRNewswire-USNewswire/ -- As rattled consumers face rising gas prices, inflation concerns and increasing financial woes, consumer sentiment numbers have dropped significantly. The Consumer Reports Sentiment Index has dropped to 45.7 from 50.2 the prior month. This significant step back returned consumer sentiment to negative territory, leaving it at a level comparable to one year ago.

"Our findings really show the impact of declining consumer sentiment. Despite an improving employment picture, retail activity has declined, and rising fuel prices and subsequently inflation are forcing consumers to make hard choices with their money. The uptick in the percentage of consumers who missed payments on major bills shows that the impact reaches deep into their personal finances," said Ed Farrell, a director at Consumer Reports National Survey Research Center.

Along with the decline in the consumer sentiment number, a rise in the Consumer Reports Trouble Tracker Index to 48.3 from 44.5 in April indicates that consumers are experiencing more financial difficulties than the prior month. Contributing factors to the rise included: missed payments on a major bills–not a mortgage (8.8% from 6.2%); lost or reduced health-care coverage (8.1% from 6.2%); and, negative changes to credit-card terms including increased interest rate, penalty fees, reduced credit line, or other change in terms (6.1% from 5.1%).

Despite a major drop in consumer sentiment and an uptick in the financial difficulties faced by consumers, the Consumer Reports Employment Index has continued to improve for the third consecutive month. For the second month in a row the Employment Index is in positive territory at 51.1, up from 50.5 the prior month — pointing to an improving jobs outlook. In both April and May, more Americans have started a new job in the past 30 days than have lost a job. This month, 6.7% of Americans started a new job in the past 30 days, up from 6.5% in the April report. In contrast, 4.5% have lost a job in the past 30 days, down from 5.5% a month earlier.

The Consumer Reports Stress Index, which measures the stress consumers feel in their everyday lives versus a year ago, is up to 60.3 from 56.8 for April. The Stress Index is now at its highest level since December 2010.

The decline in the Consumer Reports Consumer Sentiment Index has impacted retail. In May, the Consumer Reports Past 30-Day Retail Index declined to 11.7 from 12.6 a month earlier. Similarly Consumer Reports Next 30-Day Retail Index (reflecting planned spending in May) is down to 8.2 from 9.4 the prior month. The decline in retail spending was also evident in the interest in new and used car purchases. Versus both the prior month and prior year, past 30-day purchases of new and used cars were down.

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

Consumer Reports Sentiment Index: 45.7*

• Consumer Reports Sentiment Index is down significantly from 50.2 last month, and is comparable to one year ago at 44.6.
• The most optimistic consumers: Age 18-34 at 54.8 (down from 61.2 the prior month), and households with income of $100K or more at 56.3 (down from 60.7 a month earlier). The most pessimistic consumers: Households with income less than $50,000 at 41.2 (down slightly from 42.4 the prior month), and those age 65 and older at 36.3 (a decrease from 40.5 a month earlier).

* The Consumer Reports Sentiment Index captures respondents' attitudes regarding their financial situation, asking them if they are feeling better 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: 48.3*

• Consumers faced greater troubles this month than last month. The Consumer Reports Trouble Tracker Index rose to 48.3 in May, from April's 44.5. The Trouble Tracker Index is still down substantially from February's recent high of 58.7.
• Increases were the result of a wide range of reported financial difficulties in the past 30 days. The sharpest increases compared to the prior month included: missed payment on a major bill—not mortgage (8.8%), up 2.6% points; and, negative changes to credit-card terms—increased rate, penalty fees, etc. (6.3%), up 1.2% points.
• Overall, the most prevalent consumer trouble remains the inability to afford medical bills or medications, unchanged at 14.9% this month.
• Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days: 24.8% unable to afford medical bills or medications; 13.9% missed payment on a major bill (not a mortgage); and, 12.0% lost or reduced health-care coverage.

* The Consumer Reports Trouble Tracker Index 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 health-care 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 11.7, Next 30-Day – 8.2*

• Consumers are spending less. The Consumer Reports Past 30-Day Retail Index*, reflecting April activity, is 11.7, down from the prior month. The Consumer Reports Next 30-Day Retail Index, reflecting planned purchasing in May, is also down, standing at 8.2 versus 9.4 the prior month and 9.0 one year ago.
• Looking in detail at the categories comprising the Past 30-Day Retail Index (major appliances, small appliances, major home electronics, personal electronics, major yard/garden equipment), May's losses were the result of declines in personal electronics (23.2%), down 3.0% points from the prior month; major home electronics (13.6%), down 1.8% points from a month earlier; and, major appliances (8.1%), down 0.6% points from March.
• The Consumer Reports Next 30-Day Retail Index for May, reflecting May's activity, is 8.2, down from both last month (9.4) and one year ago (9.0). Versus the prior month, losses were the result of a decline in planned purchasing over the next 30 days for personal electronics (14.1%), down 4.7% points; and, major appliances (4.8%), down 2.4% points.
• Among the non-index categories, past 30-day purchases, reflecting April activity, were down versus the prior month for new cars (1.8% vs. 3.0%), and used cars (3.9% vs. 5.3%), while home purchasing was unchanged (1.9% vs. 2.1%). Planned purchasing over the next 30 days, reflecting May activity across these categories, shows a slight rebound versus the prior month for new cars (2.4% vs. 1.1%), and an increase in planned home purchasing (2.2% vs. 1.1%), while used cars are unchanged (4.0% vs. 4.3%).

* 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 Employment Index: 51.1*

• The Consumer Reports Employment Index continues to move into positive territory (51.1), up slightly from last month (50.5), and marks the third consecutive month of improvement. For the first time since tracking began in April 2009, the Consumer Reports Employment Index for consumers across the economic spectrum is in positive territory, ranging from 51.5 among those in households earning less than $50,000 to 51.1 in households earning $100,000 or more.

* 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.

Consumer Reports Stress Index: 60.3*

• The level of stress consumers feel they are under is up in May to 60.3 from 56.8 the prior month.

* 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).

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 1,259 interviews were completed (1,009 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between April 28 and May 1. The margin of error is +/- 2.8 percentage 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].

MAY 2011

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SOURCE Consumer Reports