Consumer Reports Index Sustains March's Gains; Retailing Indicators Stronger Than Expected

Consumer sentiment positive for second straight month, as employment and spending improve, while household financial difficulties diminish from a year ago

YONKERS, N.Y., April 12, 2011 /PRNewswire-USNewswire/ -- Consumers are becoming more upbeat about the economy, as the Consumer Reports Index in April remained positive for the second consecutive month. The index points to an improving employment climate, higher consumer spending, and a reduction in overall household financial stress for the American consumer.

"While the economy still has a way to go before we can say a recovery has taken hold, consumers are in a better spot than they were last year and we're seeing an improving trend," said Ed Farrell, a director of the Consumer Reports National Research Center.  

The Consumer Reports Sentiment Index was at 50.2, which is close to last month's 50.3, when the index was in positive territory for the first time since it was launched in 2008 and is up substantially from a year ago (43.7).  

"Some of the more positive signs have been a rise in job creation, an increased willingness to spend on the consumers' part and people responding to the survey saying they are encountering less stress than in previous months. Sustaining these gains is contingent upon improvements in hiring," Farrell added.

The Consumer Reports Employment Index showed that more jobs were created than lost in the past 30 days and pushed into positive territory (50.5), representing the third consecutive month of improvement.  In April, 6.5 percent of those surveyed reported starting a new job versus 5.5 percent of people claiming to have lost their job in the past 30 days.  

The Consumer Reports Trouble Tracker Index, which measures the breadth and depth of financial difficulties faced by households, improved to 44.5 from 44.8 last month.  The Trouble Tracker Index has improved significantly from February's 58.7.  Fewer people missed major bill payments, faced negative credit terms, or missed a mortgage payment.  One negative to emerge in the Trouble Tracker was that a higher percentage of people — 15.3 percent — were unable to afford medical bills or medications in the past 30 days, versus the 11.4 percent reported in March.

These improvements appear to have set the stage for increased consumer spending.  Retail spending activity increased substantially from the prior month and the comparable year-ago period, according to the Consumer Reports Past 30-Day Retail Index, which rose to 12.6 in April from 10.5 the preceding month.  Projected retail spending also showed a substantial increase in the Next 30-Day Retail Index to 9.4 in April from 7.6 a month ago.

"Consumers we asked last month said they were likely to be a bit more frugal, but the results show that actual spending was higher than they previously had planned," Farrell said.

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: 50.2*

• Consumer Reports Sentiment Index has remained in positive territory at 50.2, very close to the 50.3 reported last month and much higher than the 43.7 a year ago.
• The most optimistic consumers: Age 18-34 at 61.2 (up from 57.4 the prior month), and households with income of $100K or more at 60.7 (an increase from 59.9 a month earlier). The most pessimistic consumers: Households with income less than $50,000 at 42.4 (down slightly from 43.2 the prior month), and those age 65 and older at 40.5 (a decrease from 42.6 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: 44.5*

• Consumers faced fewer troubles this month than last. The Trouble Tracker Index fell to 44.5 in April, from March's 44.8. The Trouble Tracker Index is now at its lowest level for the second consecutive month since it was first released in April 2008.
• Declines were evident for a wide range of reported financial difficulties in the past 30 days. The sharpest declines compared to the prior month included: Missed payment on a major bill—not mortgage (6.2%), down 2.1% points; Negative changes to credit-card terms—increased rate, penalty fees, etc. (5.1%), down 1.7% points; Missed mortgage payment (1.9%), down 1.8% points. As mentioned earlier, the proportion unable to afford medical bills or medications increased since the prior month.
• Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days: 24.3% Unable to afford medical bills or medications; 7.5% Missed payment on a major bill (not a mortgage); and 8.1% Lost or reduced health-care coverage.
• The proportion missing a mortgage payment in the past 30 days fell to 1.9 percent — the lowest figure since June 2009 — from 3.7 percent in March.

*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 12.6, Next 30-Day – 9.4*

• The Consumer Reports Past 30-Day Retail Index for April, reflecting March activity, is 12.6, up significantly from both the prior month (10.5) and a year ago (10.4).  The Next 30-Day Retail Index*, reflecting planned purchasing in this month, is also up, standing at 9.4 versus 7.6 the prior month and 8.3 a 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), the only category that fell was small appliances versus the prior month.  All categories were higher than a year ago.
• Among the non-index categories (new car, used car, home), past 30-day purchases, reflecting March activity, are higher than a year ago for both new cars (3.0% vs. 2.3%) and used cars (5.3% vs. 4.6%), and for home purchases (2.1% vs. 1.4%). Planned purchasing in April versus a year ago is flat for used cars (4.3% vs. 4.2%) and down for new cars (1.1 % vs. 2.1 %) and homes (1.1% vs. 1.5%), compared with the year ago period.

*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: 50.5*

• The Employment Index is up slightly to 50.5 from 49.7 in March.  In the past 30 days, the proportion of Americans that have lost their job is 5.5%, higher than a month earlier's 5.3%. The number of Americans that have started a job in the past 30 days is 6.5%, an increase from 4.6% last month and 5.0% a year ago.

*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: 56.8*

• The level of stress consumers feel they are under is down slightly in April to 56.8 from 58.7 the prior month and 63.8 the prior year.

*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 1,258 interviews were completed (1,008 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between March 31 and April 3. 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: Bill Borden, 973-316-1665, [email protected].

APRIL 2011

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SOURCE Consumer Reports